Negative gearing is a tax strategy used by property
investors to offset their losses against other income, such as salary or wages. This can help to reduce their taxable income and their tax liability.
Negative gearing occurs when the total cost of owning a property, including mortgage
interest, rates, taxes, maintenance and repairs, and vacancy costs, exceeds the total
income generated by the property.
There are a number of reasons why investors might choose to negatively gear their property investments. These include:
To reduce their taxable income: Negative gearing can help investors to reduce their taxable income, which can save them money on tax.
To build equity in their property: Over time, the value of property can increase. This means that investors who negatively gear their property investments can build equity in their properties, which can be used to fund future
investments or to provide a financial buffer in retirement.
To generate tax deductions: Negative gearing can generate tax deductions, which can be used to offset other income, such as salary or wages. This can save investors money on tax.