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In its simplest form, negative gearing occurs when the interest that investors are paying on the loan is more than the income or rental return generated by their asset. As a tax incentive, it allows investors to claim the costs of holding the asset as a direct deduction on their total income. By claiming deductions, investors reduce their taxable income and, ultimately, their tax payable. As the income tax is reduced, their cash flow is improved.

Together with other benefits and incentives such as first home owner grants, discounted interest rates and special lending standards, negative gearing has, in essence, improved the affordability of housing. In fact, a recent study found that 62 per cent of investors rely on negative gearing to assist in funding their homes.

However, the same study stated that negative gearing, along with other incentives such as capital gains discounts, fire homeowner grants, and the superannuation saver schemes, is costing the government $14 billion.

Political parties have recommended the abolishment of negative gearing, referring to it as an ‘unnecessary perk’ for property investors that hinders first home buyers from purchasing a dwelling. On the other hand, experts strongly insist that the abolishment will affect affordable housing the most, thereby, being a counterproductive response to the issue.

Truly, negative gearing stands as one of the most common points of contention among investors, experts and even the government in the vast landscape of property investment.

Smart Property Investment (SPI) gives you an insight on the different opinions and educational discussions on negative gearing to help you understand the policies that influence the business of wealth-creation across the country, mitigate financial risks that may affect your portfolio and ultimately determine the best strategies that will move your investment journey forward.

Negative gearing

<div class="b-category-pagecustomheader"> <p>In its simplest form, negative gearing occurs when the interest that investors are paying on the loan is more than the income or rental return generated by their asset. As a tax incentive, it allows investors to claim the costs of holding the asset as a direct deduction on their total income. By claiming deductions, investors reduce their taxable income and, ultimately, their tax payable. As the income tax is reduced, their cash flow is improved. </p> <div class="page_subheading_desc-content" style="display: none;"> <p>Together with other benefits and incentives such as first home owner grants, discounted interest rates and special lending standards, negative gearing has, in essence, improved the affordability of housing. In fact, a <a href="https://www.smartpropertyinvestment.com.au/research/17126-the-challenge-of-negative-gearing-for-property-investors">recent study</a> found that 62 per cent of investors rely on negative gearing to assist in funding their homes.</p> <p>However, the same study stated that negative gearing, along with other incentives such as capital gains discounts, fire homeowner grants, and the superannuation saver schemes, is costing the government $14 billion.</p> <p>Political parties have recommended the abolishment of negative gearing, referring to it as an ‘unnecessary perk’ for property investors that hinders first home buyers from purchasing a dwelling. On the other hand, <a href="https://www.smartpropertyinvestment.com.au/research/17845-why-negative-gearing-is-necessary">experts</a> strongly insist that the abolishment will affect affordable housing the most, thereby, being a counterproductive response to the issue. </p> <p>Truly, negative gearing stands as one of the most common points of contention among investors, experts and even the government in the vast landscape of property investment.</p> <p>Smart Property Investment (SPI) gives you an insight on the different opinions and educational discussions on negative gearing to help you understand the policies that influence the business of wealth-creation across the country, mitigate financial risks that may affect your portfolio and ultimately determine the best strategies that will move your investment journey forward.</p> </div> <div class="page_subheading_desc-read-more" style="text-align: center; opacity: .8; cursor: pointer;"></div><span class="page_subheading_desc_icon"><i class="fa fa-caret-down page_subheading_desc_icon" aria-hidden="true"></i></span> </div>

simon buckingham

Hotspots 25 JUL 2016

Is negative gearing 'safe' now?

With the federal election now behind us, can we conclude that radical changes to negative gearing are unlikely to...

simon buckingham

Hotspots 28 JUN 2016

Why Labor's negative gearing policy might be bad for everyone: Part 3

In the final instalment of this three-part analysis, it's time to revisit claimed benefits of the policy and attempt to...

spi default article image em4omm

Hotspots 27 JUN 2016

Why Labor's negative gearing policy might be bad for everyone: Part 2

What are the potential effects of Labor’s negative gearing policy on rents, house prices and the wider economy...

simon buckingham

Hotspots 22 JUN 2016

Why Labor's negative gearing policy might be bad for everyone: Part 1

In the lead-up to the federal election, now is a good time to explore the effects that Labor’s stated policies could...

grant harrod

Hotspots 20 JUN 2016

Why is negative gearing important to renters?

Tenants will go to the polling booths on 2 July knowing the rental payments on their next lease could increase,...

nick holden

Hotspots 15 JUN 2016

A short history of negative gearing

In any sensible debate on negative gearing, it is essential to explore the history and understand the potential impacts...

spi default article image em4omm

Tax & Legal 15 JUN 2016

Changes to negative gearing ‘will exacerbate the problem’

Questions surrounding the impact that negative gearing might have on housing affordability are back in the spotlight in...

caution

Tax & Legal 08 JUN 2016

Labor’s negative gearing model ‘dangerously misleading’

As the federal election draws closer, an industry lobby group for property investors has warned that the Labor...

spi default article image em4omm

Tax & Legal 20 MAY 2016

Former PM hits out at past negative gearing failure

With the negative gearing debate refusing to go away, John Howard has reminded voters of where it all went wrong.

paul benion

Hotspots 16 MAY 2016

Which cities would suffer most from negative gearing changes?

Very low rental returns in two Australian capitals could indicate that investors with properties in these cities are...

gears

Tax & Legal 11 MAY 2016

‘Large-scale’ sell-off of properties under negative gearing reform

Changes to negative gearing policy could cause a mass sale of negatively geared properties and an increase in rental...

gears

Tax & Legal 02 MAY 2016

HIA welcomes negative gearing decision

The Housing Industry Association (HIA) says the federal government’s decision to leave negative gearing unchanged...

gears

Tax & Legal 28 APR 2016

Turnbull hits back at critics over negative gearing

Prime Minister Malcolm Turnbull has defended the Coalition’s position after coming under criticism for ruling out...

spi default article image em4omm

Tax & Legal 28 APR 2016

Negative gearing decision a win for all, says expert

The head of a property investment consultancy has welcomed the federal government’s decision on negative gearing, but...

income expenses

Tax & Legal 23 MAR 2016

Downturn ahead: will negative gearing changes make it worse?

A prominent industry economist has urged the federal government to show more leadership on housing supply and policy...

mike mortlock

Hotspots 08 MAR 2016

Setting the record straight on negative gearing

Much has been posited about the typical Australian property investor, especially their salary. But what does it all...

arrow crash

Tax & Legal 04 MAR 2016

Negative gearing changes could see values slump by 6%

A new report has suggested that changes to negative gearing policy could push rents up dramatically, while...

josh masters

Hotspots 26 FEB 2016

Making lemonade out of negative gearing cuts

If the tax incentive is the only thing keeping you in the market, it might be time to reassess your property...

arrow crash

Tax & Legal 18 FEB 2016

Negative gearing changes ‘disastrous’

One state is set to bear the brunt of Labor’s controversial new negative gearing limits, with many towns that are...

income expenses

Tax & Legal 17 FEB 2016

ALP changes ‘as good as killing off negative gearing altogether’

Plans to constrain negative gearing to new builds only have been lambasted by various industry groups and figures,...

calculator with pen

Tax & Legal 08 FEB 2016

Major parties given negative gearing warning

A peak property industry body has used a parliamentary committee submission to highlight the potential political...

income expenses

Tax & Legal 04 FEB 2016

Survey: Axing negative gearing would lead to increase in listings

A new survey has uncovered the way Australian investors are structuring their property portfolios, with respondents...

income expenses

Hotspots 07 DEC 2015

What is negative gearing?

Negative gearing – the media, politicians and investors love talking about it, but what does it actually mean and why...

spi default article image em4omm

Tax & Legal 30 OCT 2015

Is it time to change negative gearing?

Axing negative gearing will have broader consequences for the property market, but many investors have indicated their...

investor handling counting money spi

Hotspots 27 OCT 2015

Getting to grips with negative gearing