A rental property is negatively geared if it is purchased with the assistance of borrowed funds and the net rental income, after deducting other expenses, is less than the interest on the borrowings.
The overall taxation result of a negatively geared property is that a net rental loss arises. In this case, you may be able to claim a deduction for the full amount of rental expenses against your rental and other income (such as salary, wages or business income) when you complete your tax return for the relevant income year. Where the other income is not sufficient to absorb the loss it is carried forward to the next tax year.
If by negatively gearing a rental property, the rental expenses you claim in your tax return would result in a tax refund, you may reduce your rate of withholding to better match your year-end tax liability.
Choosing the Right Investment Property Loan (Some Tips….)
Property investment loans are almost similar to a home loan, however they must be considrede carefully, so that it is structured in the most tax effective manner.
Most Loans are structured as:
- Interest only loans
- Line of credit loans
With an interest only loan the principal remains the same. You only have to pay the original amount you borrowed when you finally sell the investment property, and this gives you the opportunity to pocket the Capital Gains, if any.
This is a good investment property Structure as it gives the following benefits:
- Your monthly repayments are less than they would be if you were pay off principal as well.
- You can get tax deductions on the interest payments, but none on principal repayments.
- It makes it easier to calculate the true returns from a property.
Line of credit
If you already own a property, a line of credit is a way for you to utilize your equity you have in that property and, use it as a deposit for your investment property.
A line of credit loan allows you to draw from a fixed amount at any time to pay for whatever you want. It’s kind of like a credit card with a big limit but the equity in your home acts as security for the loan.
Find the best loan for you
Like when choosing any other home loan, you need to compare rates, features, fees and charges, and structure it correctly to provide maximum tax benefits.
We have a strong team of Mortgage Brokers and clubbed with the team of specialist accountants, we can assist in choosing the right loan product and structure it in the most efficient manner.
Why not speak to us to discuss your options….. Call us on 02-92311890