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interest deductibility

Discussion in 'Accounting & Tax' started by Tranquilo, 29th Jul, 2015.

  1. Tranquilo

    Tranquilo Well-Known Member Premium Member

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    If you are neutral or positive cash flow is any of the interest deductible?.
     
  2. MRO

    MRO Well-Known Member

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    The tax law generally doesnt changed based on the yield/return on your investment.
     
  3. Tranquilo

    Tranquilo Well-Known Member Premium Member

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    Sorry MRO so your saying yes there is still deductibility or no.:confused:
     
  4. The Y-man

    The Y-man Moderator Staff Member

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    Technically yes.

    So if your income including rent is $100,000 and your interest bill is $30,000, then you are taxed on $70,000, not $100,000

    The Y-man
     
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  5. MRO

    MRO Well-Known Member

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    Yes it is deductible, whether you make or lose money doesn't impact what deductions you can claim.
     
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  6. Tranquilo

    Tranquilo Well-Known Member Premium Member

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    Thanks guys Ok I understand now. I really learn something from here everyday:)
     
  7. Tranquilo

    Tranquilo Well-Known Member Premium Member

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    Hang on I thought I understood. So you don't have to be negative geared to claim deductibility?
     
  8. MRO

    MRO Well-Known Member

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    In very simple terms:

    Rent income - rent expenses (including interest) = taxable income/loss

    The result can be positive or negative but the formula doesnt change.
     
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  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    s 8-1 = Deductible.

    But where the expenses = the income there is no net loss so no negative gearing benefit
     
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  10. Tranquilo

    Tranquilo Well-Known Member Premium Member

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    Ok thanks again. You both are worth my $9.95 a month
     
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  11. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    A common question. Let me explain it another way. All rental property income is assessable. Rental deductions reduce taxable income. Interest is one of the deductions.

    +ve gearing describes the tax position when the "net rent" (income less deductions) is also positive. You pay tax on that extra.
    -ve gearing describes the tax position when the net rent is negative. The loss offsets ordinary wages for example so your taxable income drops. A larger refund occurs.

    +ve and -ve gearing isn't same as cashflows. Major non-cash deductions like Depn and cap allowances can turn a neutral geared cashflow into a negative geared tax return income item and then the refund means the cashflow becomes +ve.
     
  12. Tranquilo

    Tranquilo Well-Known Member Premium Member

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    Thanks Paul let me try and let that sink in:)