Chartered Accountants

Negative Gearing

Negative Gearing is a term ascribed to the taxation advantage gained by financing the acquisition of dividend yielding shares or rental income earning properties, or in fact any income earning asset.

Advice Recommended :

  1. Appoint an independent Financial Planner if the nature of proposed investment requires it.
  2. Engage iTax Consultants : Seek an objective review of taxation savings and cash flow analysis to determine affordability.

Our Classic Tips :

  1. Do not assume bona fides of someone who markets negative gearing and tries to be a one stop shop for the property or asset, finance and advisory. They may "have the property for you" but it may be an offload for them and derive large commissions on sale and brokerage. Its an investment decision so you should seek appropriate advice.
  2. Never acquire an asset solely for any perceived taxation advantage.
  3. Property development should not be undertaken without proper feasibility studies, professional legal and taxation advice. The taxation side may involve consideratuion of GST, income tax and capital gains tax issues. Amateurs beware as there are costly pitfalls.
  4. Income earning buildings, or improvements to existing ones may attract special write offs as well as depreciation allowances which will provide taxation savings. In some cases a quantity surveyor tax report may be required. Please contact our office for advice.
  5. Purchasing shares for speculative purposes may risk loss of franking credits. Seek taxation advice regardless of structure.
  6. Rental to related persons should always be on commercial "arms length" terms as otherwise a loss may not be allowable or may require apportinoment.
  7. Borrowing costs may be allowable so keep details of cost of finance.
  8. Loan interest may not be fully allowable if a redraw taints a loan.
  9. Finance should be appropriately structured to allow for income tax and cash flow issues.
  10. Depreciation concessions provide options which may easily be overlooked especially where there are two or more owners.

Latest Accounting News

  • State and Federal COVID-19 support --- January - 2022

    The following links are to the latest state and federal government plans, schemes, programs, and initiatives to help businesses and individuals manage the impact of yet more COVID-19 restrictions.

  • Beware section 99B

      Imagine this scenario: George, who lives in Melbourne and is aged 23, gets a call from his grandmother in Athens. Grandma says she is going to give him $100,000 for Christmas. George is ecstatic. With profuse thankfulness, George gives Grandma the bank details.  

  • ATO provides further clarity on DIN process

      The ATO and the SMSF Association have clarified some of the areas of confusion with respect to the director identification number process and outlined some of the ATO’s longer-term plans.  

  • Unpaid client invoices placing greater pressure on SMEs

      The number of SMEs struggling due to late payments is still being felt, according to new research.