Negative gearing is just a flash way to say that you are making a loss on your property, a chartered tax adviser has reminded new and aspiring investors.
Cheryl Mallett, a fellow of the Institute of Public Accountants and partner of Vita Gustafson and Associates, has iterated the importance of people being mindful of not being “enamoured with the word negative gearing”.
She said there are a lot of people out there that miss what the whole concept of negative gearing actually is.
“It means that the income that you’re getting in isn’t enough to cover the interest and other expenses that are going out,” she offered by way of explanation.
“You’ve got to be prepared for that and [not] get carried away with the romance of negative gearing, because that’s exactly what it is.
“You have to have the money in your pocket to be able to pay the additional expenses that are more than the income.”
Ms Mallett outlined that there are a number of expenses that are related to maintenance of a rental property than can be classed as deductible, such as body corporate, electricity, power, water, land tax, that could provide for an increased tax refund.
But, she again reiterated that “the initial thing to think about is first, to get that income tax deduction against other income, you’ve got to pay the money out”.
Ms Mallett has previously warned SPI readers that they shouldn’t be a slave to their property tax deduction scheme.