The whole notion of negative gearing is that you are incurring more costs then you are receiving income from renting a property, so you don’t really choose to negative gear or not, it is just potentially a consequence of renting a property depending on your circumstances. More likely then not, if you have a large loan balance then you will be negative gearing.
LOSE IN THE SHORT TERM TO GAIN IN THE LONG TERM
The idea behind negative gearing is that you are hoping that the money that you lose short term from having more costs than income is that the growth in value from the property over time will more than outweigh the losses along the way.
Having a negative geared property will generate you a tax benefit because it can be offset against your other income and result in you paying less tax than you otherwise would.
NEGATIVE GEARING NOT ALWAYS THE BEST OPTION
Further in relation to property investing, if you can find a great property that isn’t negatively geared (i.e., income is greater than expenses) then that shouldn’t be viewed as a disadvantage. It is always better to be making money then to be losing money. Some people get into a mindset that they have to only have negatively geared properties, however, if you can find a property that generates more income then costs that is always the way to go (pending the location, growth prospects and so forth that you would normally look at when buying a property).
RENTING THROUGH AN AGENT VS PRIVATELY
Renting through an agent has no differing tax implications than if you rented a property privately. People often opt to rent through an agent more due to the convenience of them managing the property and sorting out any issues that arise.
REMEMBER YOUR RECEIPTS
Any money at all that you spend on a rental property you should keep receipts for. The most common costs are:
- Internet Advertising
- Pest fees
- Repairs to the property
- Purchases of new assets for use in the property (like a new cooktop).
It is always best to keep all your receipts for anything you spend on the property just in case. If you use an accountant, you can have them confirm that the costs are claimable.
HAVE MORE QUESTIONS?
Contact the Brunslea Park team on firstname.lastname@example.org or Mathew Smith from Bush & Campbell directly on MSmith@bushcampbell.com.au.