Let’s say that your Investment Property is costing you money – is this is a good thing?
YES!
How? Because you have access to Negative Gearing.
Negative Gearing is where you use the loss you are making on your Investment Property and the Depreciation, and reduce your taxable income by that amount – this therefore provides you with a tax savings/refund which can counteract the initial cost for you.
See an example below:
| Income | Rent: | $25,000 |
| LESS | ||
| Expenses | Interest: | $20,000 |
| Property Manager: | $2,000 | |
| Insurance: | $2,000 | |
| Rates: | $2,000 | |
| Maintenance: | $2,000 | |
| Cost: | $3,000 | |
| PLUS | ||
| Depreciation est.: | $9,000 | |
| Total (Tax Loss): | $12,000 | |
| this is what you will reduce your taxable income by | ||
| Tax Loss: | $12,000 | |
| TIMES | ||
| Marginal Tax Rate: | 34.5% | |
| Tax Savings / Refund: | $4,140 | |
| Original Cost: | $3,000 | |
| LESS | ||
| Tax Savings / Refund: | $4,140 | |
| Cash Positive after using Negative Gearing! | $1,140 | |
Do you know if you have Negative Gearing available to you?
Have a chat with the team so they can complete a complimentary review of your Investment Property to ensure you are using it to your advantage!