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Property investors breathed a sigh of relief this week after the federal government and the federal opposition party ruled out the prospect of abolishing negative gearing.
At a debate held at the National Press Club in Canberra, both parties said they would not consider abolishing the investment strategy.
Real Estate Institute of Australia (REIA) president David Airey welcomed the governments’ unanimous stance.
"This is fantastic news for renters, affordable housing and real estate investors," Mr Airey said.
If you’re a budding property buyer chances are you’re wondering why this is such fantastic news.
The reason is that negative gearing is a very popular strategy among Australian property investors. This is because it can significantly reduce the costs of purchasing property.
Essentially, a property is negatively geared when the costs associated with it amount to more than the income it produces. In other words the costs of servicing your loan and managing the property are not offset by your rental income and you end up making a loss.
This is a sought-after position because Australian tax legislation allows investors to claim tax back on that loss.
For a complete report on what negative gearing is and how it works be sure to check out the September issue of Smart Property Investment, hitting shelves soon.