Two thirds of investment property owners report negative gearing
Negative gearing occurs when the funds used for buying a property costs more in interest than that actual income generated from renting that property.
The Australian Taxation Office (ATO) recently released its tax report for the 2010/11 tax year, which revealed that 1,213,595 out of 1,811,174 individuals who owned investment properties in that time reported a loss on their rental income.
The total value of the losses for the year was $13.285 billion.
While this may sound like a tragedy for property investors around the country, there are certain financial benefits for making a financial loss this way.
The investor can claim a deduction for their rental expenses against their other sources of income like salary, wages, business income or other rental revenues.
As well as this, negatively geared properties are beneficial for the government and the tax payer since investors can offer cheaper alternatives to social housing because of them, which means that some of the demand for affordable housing is met through private investment.