Borrowing for an investment property, also known as gearing, can take the form of negative, positive and neutral gearing. Negative gearing in particular is often used as a basis for investment strategies to do with purchasing investment property.
In essence, you are investing someone else’s money (Bank or Financial Institution) in addition to your own, with the long term goal of accumulating wealth faster by increasing your total assets and investments.
Negative gearing is when you borrow money from a bank or other financial institution to acquire an investment property, and the interest and other costs you incur are more than the income that you receive from the investment – you make a loss for holding that property.
The Australian Tax Office (ATO) allows property investors to offset the loss incurred against another form of income, which reduces your overall taxable income and the amount of tax that you have to pay – in comparison to the amount of tax that you would usually have paid if you didn’t have the investment property.
A well planned and implemented negative gearing strategy is a powerful way to gain long term capital growth in your portfolio. Through research of high growth areas and rental returns the team at National Investment Planning can advise you on choosing a property that will increase in value over time.
Creating an investment portfolio with negatively geared property gives yearly tax reductions and an increased net worth, which can be an integral part of your wealth creation for your future.
Below is a checklist of typical deductions directly related to rental properties you may be able be claim: (as always check with your accountant to confirm in your situation)
What continues to attract investors to negatively geared properties, apart from the tax breaks, is the prospect of capital growth. It is a long term investment strategy, which is perfect for planning for a retirement fund with a high quality of life.
Further information on negative gearing, positive and neutral gearing, including an in depth look at negative gearing through an example is available in the free information pack.
Contact us for a free personalised assessment to see how investment gearing could work for you now and in the future.
Contact us on 1300 545 899 for a free information pack, or to arrange an obligation free consultation.