What is negative gearing?

A property is negatively geared when the costs of owning it (include interest on the loan, bank charges, maintenance, repairs and depreciation) exceed the income it produces. The property investors hope that their income losses will be more than offset by their capital gains when they eventually refinance or sell their property.

In Australia capital gain is not taxed unless you sell your property, and then it is concessionally taxed; again evoking the argument that it favours wealthy landlords. The truth is that negative gearing is more favourable for taxpayers who earn high incomes.

The benefits of negative gearing is greater the more you earn and the higher your tax rate.

Leave a Comment

Your email address will not be published. Required fields are marked *