Australian Tax Office website<\/a>.<\/p>\n\n\n\nNegative Gearing<\/strong> The term \u2018negatively geared\u2019 sometimes causes confusion, especially among people new to the intricacies of property investing. Negative gearing occurs when the costs of owning a property \u2013 interest on the loan, bank charges, maintenance, repairs and capital depreciation \u2013 exceed the income it produces. Simply, the investment property in question will run at a loss, and you must make up that shortfall from your pocket.<\/p>\n\n\n\nNegative gearing can be used as an investment strategy to reduce your taxable income, maximising available tax benefits. If the property becomes cash flow positive (see below), this profit is added to your taxable income and you may have to pay more tax depending on the structure of your investments.<\/p>\n\n\n\n
Depreciation<\/strong> Like the name suggests, depreciation is the decrease in the value of an item over time. An example of a depreciating asset is your car, which is said to reduce in value a great deal from the time you drive it out of the dealership.<\/p>\n\n\n\nRegarding investment properties, depreciation can certainly work in your favour. If your investment property depreciates, you can claim against the decreased value of your investment. Negative gearing and depreciation allowances are popular ways to reduce your tax liability. There are various rules around this in all States, so please speak to a professional, or we can get you in touch with the experts!<\/p>\n\n\n\n
Cash flow positive<\/strong> The reverse of negative gearing, your investment property is considered to be cashflow positive if your income generated from the property is greater than your outgoings \u2013 after you\u2019ve taken into account tax deductions. Tax deductions include interest paid on your loan, depreciation, maintenance and service costs.<\/p>\n\n\n\nEquity<\/strong> Equity is the difference between what your residence or investment property is worth and how much you owe on it.<\/p>\n\n\n\nPut simply, if your property is worth $300,000 and you still owe $100,000, you have $200,000 in equity. Over time, as you reduce the amount you owe on your home or the value of your home grows, your equity increases. Equity is a very good thing to have as it can be used to leverage further property purchases without your having to save a new deposit.<\/p>\n\n\n\n
Of course, there are lots more real estate and legal terms you will come across at tax time and when investing in property. We recommend you seek professional advice. Contact us to learn more.<\/p>\n","protected":false},"excerpt":{"rendered":"
Well, the tell-tale signs that we are near the end of the financial year are upon us! Advertisements for EOFY sales are everywhere we look, search parties for those mislaid receipts, and the usual tax time property jargon such as \u201cdepreciation\u201d and \u201cnegative gearing\u201d being bandied around the water cooler. Real estate at tax time […]<\/p>\n","protected":false},"author":1,"featured_media":953,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[97],"tags":[],"post_folder":[92],"_links":{"self":[{"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/posts\/883"}],"collection":[{"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/comments?post=883"}],"version-history":[{"count":2,"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/posts\/883\/revisions"}],"predecessor-version":[{"id":2530,"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/posts\/883\/revisions\/2530"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/media\/953"}],"wp:attachment":[{"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/media?parent=883"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/categories?post=883"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/tags?post=883"},{"taxonomy":"post_folder","embeddable":true,"href":"https:\/\/aglend.com.au\/wp-json\/wp\/v2\/post_folder?post=883"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}