Berry Blog

Want To Know What Negative Gearing Is?

Gearing is when you borrow money to invest, and it’s typically talked about in the context of investment properties. The income earned from your investment property is either positively or negatively geared.

A property is negatively geared when your rental return is less than your interest repayments and other property-related expenses. This means the landlord would be out of pocket with the outgoing payments as they are unable to just rely on the incoming rent from the tenant.

Whereas if a property is positively geared the rental return is more than the interest repayments and other property-related expenses. This means the landlord can be profiting whilst still paying off their bills.

The main benefit of a negatively geared property is that the landlord can offset any losses during the financial year against other earnings, such as a salary or wage. In other words, this strategy trims your taxable income legally and reduces your annual tax liability payable to the ATO.

According to the Australian Tax Office, an investor may be able to claim the interest portion of the loan repayments and some other rental expenses as tax deductions, as long as the property is rented or is available to tenants.

Want more information or looking to buy off the plan? We would love to help! Visit our Berry office and talk to one of our friendly agents or call us on 4464 1300!