WHAT THE HELL IS “NEGATIVE GEARING”
Here we go.... it’s flung around like a football at an NRL game. Half of the conversations I have with people ask about it, but have no idea what the hell it means.
So let me try and make this as simple as possible
*disclaimer – go and talk to your accountant / advisor – this is general advise, blah blah blah”
So Barbara has purchased an investment property – she pays $30,000 in interest payments per year on that property with her mortgage. For arguments sake she makes $20,000 per year in rental income. She also spent $5,000 on maintenance.
Barbara makes $100,000 per year...
$30,000 + $5,000 (outgoing) take away $20,000 (income) equal to - $15,000
Barbaras income $100,000 minus $15,000 – Barbara pays tax on $85,000.
Negative gearing explained... be mindful, unless you’re doing really well for yourself, being negatively geared too heavily means you may have poor investments. Ultimately “profit” always wins!
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