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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>

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Tax & Legal 26 OCT 2015

Is negative gearing an ‘evil tax loophole’?

A big four auditing firm has addressed calls for an end to two of Australia’s most controversial tax mechanisms.

reb rba

Tax & Legal 20 JUL 2015

Scrapping negative gearing makes no sense

A chorus of business figures have issued dire predictions relating to the scrapping of negative gearing, after it...

intrest ratesx

Tax & Legal 16 JUL 2015

RBA weighs in on negative gearing

A submission by the RBA to a federal inquiry has fuelled the debate surrounding negative gearing, with the central bank...

caution5

Tax & Legal 19 JUN 2015

Scrapping negative gearing would ‘make situation worse’

With housing affordability and negative gearing continuing to generate debate, one economist has weighed in and said...

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Tax & Legal 15 JUN 2015

Negative gearing cuts ‘dangerous’

A political plan to scrap negative gearing has been slammed as a misleading and ill-conceived policy that would hurt...

social housing

Tax & Legal 09 JUN 2015

Political party seeks abolition of negative gearing

One of Australia’s political parties has announced it will push for an end to the “fundamentally unfair” negative...

top suburbs

Tax & Legal 21 MAY 2015

Negative gearing debate rages on

Negative gearing probably has a “detrimental effect” on housing affordability but the impact on rental...

price arrows

Tax & Legal 24 APR 2015

Labor ‘can’t be trusted’ over negative gearing

Joe Hockey has warned that the federal opposition could make damaging changes to negative gearing if it returns to...

supply

Tax & Legal 22 APR 2015

Negative Gearing Here To Stay - April 2015

Despite Prime Minister Tony Abbott recently ruling out changes to negative gearing, the debate about the tax policy’s...

strategy4

Tax & Legal 08 APR 2015

Calls to make negative gearing 'less appealing'

As debate about first home buyers and investor overactivity continues, one mortgage lender has suggested that changes...

negative

Tax & Legal 18 MAR 2015

Scrapping negative gearing not on the agenda

Both sides of politics are committed to retaining negative gearing, a senior federal politician has revealed.

kevin lee

Hotspots 13 MAR 2015

How to get relief from negative gearing

Understanding and being able to work with the concept of ‘gearing’ is a crucial competency every property investor...

PROPERTYMARKET

Tax & Legal 19 FEB 2015

Negative gearing protects the vulnerable

Abolishing negative gearing would hit the most vulnerable in society the hardest and put further pressure on the...

21043 sales

Tax & Legal 09 DEC 2014

Negative gearing under attack again

Negative gearing encourages “speculative investment” in property and poses a “systemic risk” to the economy, an...

negative

Tax & Legal 01 DEC 2014

Removing negative gearing would cause 50pc rental hike

Despite critics of negative gearing claiming that scrapping the scheme would save the government $5 billion in one year...

Tax & Legal 25 NOV 2014

Time to 'take action' on negative gearing

The federal government needs to tighten the reins on negative gearing as the tax break increasingly distorts the...

boostoprice

Tax & Legal 24 OCT 2014

Investors weigh in on negative gearing debate

With industry experts, politicians and journalists all weighing in on the future of negative gearing and investor...

Tax & Legal 15 OCT 2014

Time’s up for negative gearing?

A leading economist has called on the federal government to end negative gearing to limit the potential damage of a...

coins

Hotspots 23 SEP 2014

Negative gearing keeps housing affordable: HIA

Restricting access to negative gearing write-offs would negatively impact on housing affordability for both renters...

ben kingsley

Finance 01 SEP 2014

Can all investors succeed through negative gearing?

Ben Kingsley, Director, Empower Wealth

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Tax & Legal 17 JUL 2014

Government inquiry highlights negative gearing dangers

Property incentives have created a “significant source of risk” for the economy, according to the Financial System...

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Hotspots 20 JUN 2014

Do you really need negative gearing?

Many investors are dependent upon the tax advantages gained from negative gearing to sustain their investment...

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Tax & Legal 05 JUN 2014

Full cost of negative gearing often underestimated

Investors with negatively-geared property may miscalculate their profits and miss out on better opportunities, a...

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Tax & Legal 09 MAY 2014

Government urged to continue negative gearing support

Amidst fears negative gearing benefits could be in the firing line at next week’s Budget announcement, major players...

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Hotspots 14 FEB 2014

Investors ask: Negative gearing

Q. I have two properties that are slightly negatively geared and I’m struggling to see the purpose of the properties....