Negative Gearing (Australia)
Negative gearing is a form of financial leverage where an investor borrows money to invest but the gross income generated by the investment is less than the cost of owning and managing the investment, including interest charged on the borrowings (payments reducing the principal component of borrowings is not included as a cost). The investment generates a negative cashflow until the income rises to exceed the costs, or the asset is sold, at which point a potentially taxable profit is made if the capital gain on the asset exceeds the accumulated losses.
The tax treatment of interest expenses and future gain affects the after-tax return. Losses from negatively geared property investments, share investments, and other commercial business ventures are tax-deductible against other taxable personal income in Australia.
Read more about Negative Gearing (Australia): Australia, Comparison To Other Countries, See Also
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