InvestSMART

Help Centre

Frequently asked questions and other supporting information

Education
Property
Examples of Negative Gearing

Suppose you bought a property for $600,000 by taking out a $500,000 loan with an interest rate of 7%. This means that the interest payments are $35,000 annually.

Meanwhile, you are renting out the investment property for $550 a week, which is $28,600 over the whole year.

Since you are paying $35,000 in interest but only earning $28,600 in rental income, you have a net loss of $6,400. This means that you are negatively geared. You can offset the $6,400 against your taxable income to pay less tax.

A year later your property is valued at $648,000 as property prices have risen 8%. Therefore even though you had a loss of $6,400, you are $41,600 better off than the year before as the capital gain is much higher than loss you made on repayments.

 

Get in touch
Can't find what you are looking for? Contact support.