Negative positive gearing

[GlennG]

Hi all
I was just reading on Fido site

http://www.fido.gov.au/fido/fido.nsf/byheadline/Borrowing-to-invest?openDocument

And looking at this statement:

'There are great tax benefits when you borrow to invest. But not everyone gets them. You will only get them if your ongoing borrowing costs (interest and fees) are more than the income you receive (rent or dividends). This is known as 'negative gearing'.'


I don't see how the 'great tax benefits' would stop once your investment becomes positively geared. Don't you continue to get a tax deduction for your interest payments, expenses etc?

In other words, going from being slightly negatively geared to slightly positively geared, does something major happen?

It got be concerned that there's something I don't understand - I'm a bit new to all of this

Thanks for reading

 

[jaycee]

Hi Glenn,

It sounds to me like you understand it, so dont get confused, they are doiing it on purpose, or they dont actually understand what they are talking about.

You geto to claim deductions against your income - thats it. your income may be you PAYG income and your rental income. You can deduct expenses against the income that are allowed to be deducted, whatever that comes to is what you then owe in tax. If youve paid more than that amount already, you will get the difference back, if not you will get a tax bill.

I guess what they are saying (havent looked at the article, only your quote) is that when you first buy an investment proeprty and its negativek, you get tax back ! But, when it becomes positive, the income after expenses is taxable & you will have to pay tax on it rather than gt some back - you know, just like if you got another job. I don't understand why they bother to confused everyone either

 

[Brett IP]

Yeah, its almost like saying Positive Gearing is a bad thing, but ill take positive cash flow out of negative cash flow any day !! Its just you usually start off -CF and work to +CF

Cheers