Tax Blogs

Positive & Negative Geared Rentals

May 27, 2021

In our previous blog, we discussed the kind of things you would need to report on your etax return and whether your tax return is likely to be positively or negatively geared... but what does that mean and how does it affect your etax return? 

Positive gearing on your tax return

If your rental property is positively geared, then the amount it is positive by is added to your other income. Tax is then payable on this at your ordinary individual tax rate. This means your normal refund will be reduced or you may even have tax payable, boo. The opposite occurs if the rental is negatively geared. The amount your rental property is negative by is deducted from your other income. This means your overall taxable income is reduced, meaning less tax payable and increasing your refund, yay.

So, what is better you might ask. If the property is positively geared your income is more then your expenses, so you are making money. You will have extra money in your pocket and will not have to reach into your own pocket to maintain the property. It does however mean you will pay tax on the profit of the property. Remember though, tax is only payable at your individual rate, therefore you will always be in front even after paying tax. If the property is negative, you are getting the tax benefits by reducing your taxable income by the loss. The fact that it is negative does mean it is costing you more then you are receiving, you will need other income to maintain the property. You will need to ensure that the property is increasing in value, so you can offset your losses in the future through gains when the property is sold.

Hopefully this has given you an understanding of how rental properties effect your e-tax return and what negative gearing is all about. The best pointers we can give is; ensure a rental property purchase is the right move for you, research the property and the likelihood of capital growth, and ensure that you have the cashflow available to take on the investment. Happy house hunting.


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Note that the information provided is general in nature and subject to change, please contact one of our professionals who can evaluate your circumstances and provide more accurate advice to your current situation.

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