What do the new proposed changes to negative gearing mean?

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Jayson S
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Joined: Thu May 30, 2019 3:06 pm

What do the new proposed changes to negative gearing mean?

Postby Jayson S » Thu May 30, 2019 3:07 pm

Hi, I’ve been reading about Labor’s proposed changes to negative gearing. I’m trying to understand how would that affect my investment property(s). Can you elaborate?

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Otto Dargan
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Re: What do the new proposed changes to negative gearing mean?

Postby Otto Dargan » Thu May 30, 2019 5:47 pm

Hello Jayson. Welcome to the forums.

A property is said to be negatively geared when the interest on the loan is higher than the net rental income, meaning the investor is making a loss. Under current tax laws, this loss can then be deduced from other income, such as wages, reducing the investor’s taxable income in that financial year. The idea behind it is that any short-term losses will be outweighed by long-term capital gains.

Labor has proposed limiting negative gearing to new housing only if elected. That essentially means investors can only deduct net rental losses from newly constructed properties from their wage income.
Investors who purchased existing properties before the commencement date will still be able to claim losses against wage income.

Although losses from existing properties can’t be deducted from wage income, losses can still be offset against other investment income such as share dividends or carried forward to offset the capital gain on the property when it’s sold. We recommend speaking to your accountant to discuss this further.

We specialise in investment home loans.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for an interest-only investment mortgage.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Jayson S
Posts: 3
Joined: Thu May 30, 2019 3:06 pm

Re: What do the new proposed changes to negative gearing mean?

Postby Jayson S » Thu May 30, 2019 6:10 pm

No wonder they lost. I’m trying to find out at what point my newly proposed investment property is going to positively geared. Can you provide me with an excel sheet or something I can reference?

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Otto Dargan
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Location: Sydney, Australia
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Re: What do the new proposed changes to negative gearing mean?

Postby Otto Dargan » Thu May 30, 2019 6:26 pm

Hi Jayson,

You can use our investment property cash flow calculator to calculate your weekly cash flow and determine at what point your property is likely to be geared positively.
We also have an investment property income and expenses spreadsheet that is easy and simple to use.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Jayson S
Posts: 3
Joined: Thu May 30, 2019 3:06 pm

Re: What do the new proposed changes to negative gearing mean?

Postby Jayson S » Fri May 31, 2019 1:46 pm

You’ve been very helpful, one final question before I let you go. What are some of the expenses I can claim as deductions if I have a negatively geared property?

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Otto Dargan
Mortgage Specialist
Posts: 7463
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: What do the new proposed changes to negative gearing mean?

Postby Otto Dargan » Fri May 31, 2019 2:19 pm

Hi Jayson,

You can generally claim an immediate deduction against your current year’s income for your expenses related to the management and maintenance of the property including interest on loans.

Expenses for which you may be entitled to claim deductions include:
  • Advertising for tenants
  • Body corporate fees and charges
  • Council rates
  • Water charges
  • Land tax
  • Cleaning
  • Gardening and lawn mowing
  • Pest control
  • Insurance (building, contents, public liability)
  • Interest expenses
  • Property agent’s fees and commission
  • Repairs and maintenance
  • Some legal expenses

Speak with one of our specialist mortgage brokers by giving us a call on 1300 889 743 or by filling in our free assessment form to find out if you qualify for an investment loan with the most competitive interest rate.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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