Negative Gearing Information for our Melbourne Clients

06.01.18 | Marc Barlow | Resources

Negative Gearing Information for our Melbourne Clients


The structure of your loan portfolio is critical to success in property investment. From making sure the loan is secured against the correct property to offering the lender the minimum amount of security for each mortgage, MBM can help you to structure your lending in the most tax effective manner.

In tandem with your accountant, we can guide you by dispelling certain myths and project managing the finance process to ensure deadlines are met and everything is set up correctly and running smoothly post settlement.

Please find below a basic negative gearing worksheet for your information. Please note, this is a guide only to give you a general overview, specific advice from a suitable industry professional is a must.

 

Negative Gearing Demonstration

Expenditure Estimates

Loan interest                     $………………..

Agent’s fees (8%)              $………………..

Buildings Insurance           $………………..

Council Rates                    $………………..

Landlord Insurance           $………………..

Maintenance                     $………………..

Depreciation                     $………………..

Water Rates                     $………………..

Total Rental Income         $…………………           Total Expenditure             $………………..

Total Loss = Total Income – Total Expenditure                                               $………………… (A)

The loss is deducted from your taxable income in the same way someone might deduct dry cleaning expenses, education costs etc. The following figures are estimates:

 

Prior to negative gearing:                                                           Post Negative Gearing:

 

Taxable Income         $……………………             Taxable Income                $…………………..

Normal tax payable   $…………………… (B)       Minus Total Loss (A)         $…………………..

Net Income                $……………………             New taxable income        $…………………..

New Tax payable       $………………….. (C)

Tax Saving (C) – (B)  $………………….. (D)

 

Prior to negative gearing:                                                           Post Negative Gearing:

 

Taxable Income         $……………………             Taxable Income                $…………………..

Normal tax payable   $…………………… (B)       Minus the total loss           $…………………..

Net Income               $……………………             New taxable income          $…………………..

New Tax payable      $………………….. (C)

Tax Saving (C) – (B) $………………….. (D)

Net cost of the property per year = Total Loss (A) – Tax Saving (D)             $………………….

This example is for demonstration purposes only and should not be construed in any way as tax or investment advice. To discuss the impact on your individual circumstances you should seek independent financial and legal advice from a suitable industry professional. Mortgage Broker Melbourne highly recommends Philip Martin, Chartered Accountant www.accountantmelbourne.com.au