Negative Gearing

Baffled by finance terms like negative gearing - what does it mean and how can it work for you? Peter Mussared has taken the time out to explain the process for us.

___________

Investors are entitled to tax deductions for their investments. Knowing what those deductions are and how you can claim them can save you from paying more than you should.

Some rental property expenses can be claimed right away by the owner as an immediate deduction. These include:

• Repairing guttering, windows or fences damaged in a storm;
  
• Maintaining plumbing, painting, oil brushing or cleaning something that is otherwise in good working condition or repairing electrical appliances or machinery;


• Preparing a lease agreement with the tenant, evicting a tenant, interest on a loan to purchase a rental property or the purchase of land to build a rental property;


• The purchase of a depreciating asset for the property like an air conditioner;


• Finance a renovation like a deck or;


• Make maintenance repairs or repair damage to the property.

Of course, when you purchase a rental property you also purchase depreciating assets such as stoves, air conditioning and hot water systems. These can be claimed over a number of years as a decline in value deduction.

And it is not just depreciating assets relating to the rental property that can be claimed over a number of years. Borrowing costs that are part and parcel of purchasing a property can also be claimed, including stamp duty charged on the mortgage, loan establishment fees and valuation fees for loan approval. Building construction and costs for improvements to the property made by you or the previous owner are also among the deductions that can be made (usually over 25 years).

The ATO website has useful and easy to read fact sheets that explain exactly what can and cannot be claimed as a tax deduction, including some useful examples.

Visit www.ato.gov.au/rental or call 13 28 61.

Peter Mussared

Licensed Estate Agent

0409 937 862