Borrowing 100k at 3% vs 4.3% neg geared

i'm wondering what would b better off

Paying $3000 interest a year, end of story

Or paying $4,300 interest a year that i can claim neg gearing against.

How does neg gearing work. If say at highest tax rate.
Would i recoup $1300 on $4300 of interest paid when factored against neg gearing
.... which option is better

 

It depends on your tax rate

If a SMSF pension so a 0% tax rate then the 4.3% is the full after tax cost.

If at 49% then the after tax cost of 4.3% is 2.346% so that is a lower overall cost.

Of course you want to be structured so that you are not incurring tax at the rate of 49% to start with.

 

Negative gearing reflects the tax loss for net rental income (rental income less all allowable deductions). One of those costs may be interest. The loss is often offset against salary income so that it lowers taxable income. Typically around 1/3rd of the "loss" reflects as a larger tax refund. Thus improving cashflow.

Remember some tax deductions arent from cashflow. ie depreciation and cap allowances. So a property can be +ve for cashflow and still produce greater cashflow from the tax refund on top.