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Rental Properties FAQ

Landlord/Rentals FAQ

This Landlord/Rental PropertyTaxation Guide
 will help you, as an owner of a rental property in Australia, to determine the following:
 Which rental income is assessable for tax purposes.
 Which expenses are tax deductible.
 Which records you need to keep.
 What you need to know when you sell your property.

If you have equity in an existing property, cash to invest or you're looking to enter the property market for the first time, you've probably heard of negative gearing.Negative gearing is a tax treatment that applies to the income people make from rental properties.
With the correct financial advice, and the right property, negative gearing can be a positive investment decision. Read on to find out more about negative gearing.
A rental property is negatively geared if you have to borrow money to buy it and the rental income, after deducting all the other property expenses, does not cover the interest on the mortgage.

An investment property is negatively geared when the costs of owning it - interest on the loan, bank charges, agent fees, maintenance, repairs and capital depreciation - exceed the income it produces (rent).
Negative gearing offers immediate tax benefits coupled with the longer term prospect of an increase in investment value. For these reasons it's a more common choice for property speculators and/or those with hefty tax obligations.
Your investment must make a loss before you can claim a tax benefit. This not only works for property, but also shares, bonds and other investments.
This net loss can be used as a deduction against other income earned, for example a salary, before tax is paid on it.

Effective negative gearing relies on the value of the investment increasing over time. Real Estate Institute of Australia research shows that over the past 20 years house prices have increased on an annual average basis by 8.3 per cent.

Like all investment strategies, investors must consider the inherent risk associated with borrowing money for an investment. The borrowers should consider their capacity to repay the shortfall and continue servicing the investment loan should it cease to make a return if the tenants leave or for other unforeseen circumstances.
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