How is Neg Gearing calculated

Discussion in 'Accounting & Tax' started by Keentolearn77, 4th Jul, 2020.

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  1. Keentolearn77

    Keentolearn77 Well-Known Member

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    Hi All,

    Sorry I have saturdayitis, my brain aint working & I have'nt found the answer online yet

    With interest rates so low, my interest payment component for my loans are lower than my rent received, yet if I rephrase it to my 'repayments being interest component & principal component than my repayments as a whole are a lot higher than my derived rental income

    Q. - Is negative gearing calculated against monthly repayments to the bank as a whole or only the interest component......
     
    Keentolearn77, 4th Jul, 2020
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  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Negative gearing is where there is a taxable loss. So it includes all expenses, but not principal.

    The idea is that any capital gains will more than make up for losing money in the early years.
     
    Terry_w, 4th Jul, 2020
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  3. Hamish Blair

    Hamish Blair Well-Known Member

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    So only the interest component. I was able to get an interest paid / received statement from my bank’s portal.
     
    Hamish Blair, 6th Jul, 2020
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  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Paul@PAS, 6th Jul, 2020
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  5. Mike A

    Mike A Well-Known Member

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    interest component only. the principal repayment won't be included in calculating the loss for taxable income purposes.
     
    Mike A, 6th Jul, 2020
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  6. Keentolearn77

    Keentolearn77 Well-Known Member

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    Thanks for clarification Terry, I thought as much.
     
    Keentolearn77, 6th Jul, 2020
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