Negative gearing

What is negative gearing?

Negative gearing usually refers to purchasing a rental residential property. If you own the property, the Australian Tax Office allows you to offset the property’s loss against your other revenue streams. This means that expenses associated with your investment property may be claimed as deductions to reduce your tax liability.

Who is negative gearing for?

Many investors use this strategy to leverage their purchasing power and to target properties in high growth areas. We believe that a property should never be purchased just to minimise your tax bill. However, negative gearing is an important factor for many investors and we will work with you to ensure you purchase an ‘investment grade property’ that will continue to grow in value.

Deductions that can be claimed against property investments include:

• Legal fees on your mortgage and stamp duty costs
• Maintenance and cleaning expenses
• Council rates, land tax, water and owners corporation fees (if applicable)
• Building and/or landlord insurance
• Property management expenses
• Miscellaneous expenses directly linked to managing your property such as travel and communication.

Professional advice

Our experienced team can advise you on properties that lend themselves to negative gearing. Like any investment decision, it’s important to seek advice from trusted professionals before you decide if negative gearing is suitable for you. We recommend that you also speak to your accountant before purchasing a property. For more information on how negative gearing on rental properties is treated by the ATO, you can download a guide here.

Tax Depreciation

Another way to reduce your tax bill each year is to claim the depreciation on your investment property. As well as the building itself (depending on its date of construction) you can claim deprecation on fixtures and fittings such as:

• Air conditioning
• Window dressings
• Carpet
• Electrical items
• Oven
• Light fittings

We recommend that you obtain a professional depreciation schedule to determine the level of depreciation you can claim.