Proposed Negative Gearing Changes – What Does It Mean to New Home Investors?

It is likely that most of us will need to borrow to invest, which is commonly referred to as ‘Gearing.’ You might have heard about negative gearing and the proposed changes by the government. So, how does Gearing work and what do the proposed changes mean to property investors?

 

Negative Gearing

To recap and to those unfamiliar with the term; ‘Negative Gearing’ refers to the case where the income from your investment is less than the expenses. For example, the rental income you receive is less than your, depreciation, payments and interest. This ‘loss’ can be claimed against your taxable income and reduce the amount of tax you have to pay, often turning this into a positive cash flow experience.

 

The Proposed change and what does it mean?

You might have heard about a proposed change to the current Negative Gearing policy put forward by the Labor Party. If elected, this may begin at the start of the upcoming 2020-21 financial year. The proposed change specifies that investors can deduct rental loss ONLY from newly constructed properties, with the exception being for investments made before the changes, where losses can still be claimed. However, if you invest in a second-hand property after the change is effective and it becomes negatively geared, then you will not be able to claim that loss against your taxable income.

Simply put, if you have already made your investment regardless of whether the property is old or new, this change will not affect you. However, even if you make an investment after the changes, and the property is newly constructed, you will be able to claim your expenses and reduce your taxable income.

 

How will this affect investing with Smart Property Research?

As Smart Property Research specialises in investment properties that are mostly newly constructed, the proposed change on the negative gearing policy will have minimal effect on our investment services. This is good news to all our investors whether they are considering purchasing property now or in the future.

However, there is no better time for buying first investment property than NOW! Here is the Smart Property Research difference. We take the hard work out of the process and guide you every step of the way. Our extensive research includes properties from both cities and suburbs affirming that infrastructure, return and potential growth is unquestionable while putting in place the measures to ensure that the property costs less to maintain, therefore offering our clients a mostly positive cash flow experience.

Let Smart Property Research help you take the first step in your property investment journey, contact us for an obligation free chat today!

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