Negative Gearing

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narcdor
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Negative Gearing

Post by narcdor » 27 Jul 2017, 17:10

Can anyone point me towards an accurate online negative gearing calculator taking into account tax savings and deductions? Basically I want to find out how much money I would haemorrhage if I buy an investment property. Apparently investing in basses is not proving to be a high return fiscal strategy :cry
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BassLine
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Re: Negative Gearing

Post by BassLine » 27 Jul 2017, 19:25

narcdor wrote:
27 Jul 2017, 17:10
Apparently investing in basses is not proving to be a high return fiscal strategy..... YET.
Fixed it for ya. ;)
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DoctorJohn
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Re: Negative Gearing

Post by DoctorJohn » 27 Jul 2017, 19:32

Negative gearing isn't some backdoor way to wealth. Negative implies you are losing money which is by nature a bad investment. Some of the loss is recovered, but only the percentage which equates to your marginal tax rate and only up to the value of tax you've paid.

The light at the end of the tunnel was capital growth but all the signs are there that we are in a housing bubble which could pop at any time. Property used to be a good investment, but not so much so these days.

Getting in when the bubble pops is a different kettle of fish though.

Just my 2 cents
Last edited by DoctorJohn on 28 Jul 2017, 10:57, edited 2 times in total.

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NotTheFish
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Re: Negative Gearing

Post by NotTheFish » 28 Jul 2017, 09:14

The only calculator I can think of is using the actual TAX online through MYGOV and putting in the figures of your earnings and you deductions etc and seeing what it comes up with and not saving or submitting the results.

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Aussie Mark
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Re: Negative Gearing

Post by Aussie Mark » 28 Jul 2017, 11:26

Do you really want to deal with tenants, or pay 15% of your revenue to someone else to deal with tenants?

A share portfolio of blue chip stock performs just as well (or better) in the long term, is more easily converted back to cash when required, has minimal set up and exit costs (unlike buying or selling property), no repair and maintenance expenses, no psycho tenants, and can be set up negatively geared via a margin loan. An added advantage over a property investment is that the dividend income is pre-filled by the ATO into your tax return (because companies lodge the info with the ATO just like banks lodge your bank account interest details) so the admin at your end is far less onerous compared with keeping track of all the rental property expenses (repairs and maintenance, agent fees, landlord insurance) - the only expenses are broker fee on buy/sell, and margin loan interest (if you have a margin loan). Very simple to manage at tax time.

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NotTheFish
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Re: Negative Gearing

Post by NotTheFish » 28 Jul 2017, 11:51

^ Of course negative gearing can be applied to shares too. The margin loan you mention is the same as a loan on an investment property. The interest is tax deductable. You just need to be aware of the value of shares to loan ratio so you don't get caught out on a "margin call". Which means you have to pay of a certain amount of the loan to get the ratio of equity to loan back to the agreed value. The thing with gearing is that it can increase your losses the same as it can increase your profits. My thinking is that any investment that only stands up due to tax implications isn't really a strong investment.

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narcdor
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Re: Negative Gearing

Post by narcdor » 28 Jul 2017, 12:19

It's less about investment/wealth generation and more about figuring out how to own a house to live in within the next 50 years somewhere I actually want to be.

I've been furiously calculating in Excel so I've got a pretty good idea about options now, thanks all for your input so far.
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vin-tone
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Re: Negative Gearing

Post by vin-tone » 28 Jul 2017, 13:23

I would separate where you want to invest from where you want to live - especially if you're talking about 20+ years. eg. better rental returns are found near universities but you might want to live near the beach, city, bush etc...

It's no big deal to flip/buy at that point.

The caveat buying your first home as an investment is that you miss out on first home-owners incentive (currently stamp duty holiday?)

BTW I agree with the people recommending stocks ATM.
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narcdor
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Re: Negative Gearing

Post by narcdor » 28 Jul 2017, 13:55

I'll be buying for the family to live in, looking at fallback options such as renting it out in case interest rates go to hell and I'm left holding the bag. Incidentally it's also a good location for rental returns so that helps :thumbup:

I appreciate the input you are all giving infinitely sensible advice, really.
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slave
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Re: Negative Gearing

Post by slave » 28 Jul 2017, 18:43

narcdor wrote:
28 Jul 2017, 12:19
It's less about investment/wealth generation and more about figuring out how to own a house to live in within the next 50 years somewhere I actually want to be.
Depends if you're aiming to be dodgy.
I've heard of plenty of stories of guys both buying a house *for each other*. So they were effectively negative gearing a house they were living in, renting only on paper. Worth a thought if you think you can live with it.
Personally I don't know what the legal side of this might be, or what exposure you might expect.

Personally, unless negative gearing will certainly drop you under a tax bracket, I don't see a point in pursuing it.
Really all you'd be doing is losing money on something that HAS to appreciate steeply for you to make decent money.
I prefer the idea of shares, where if the proverbial hits the fan, you can pull your cash out and address whatever emergency situation presents itself.

A friend of mine has chosen to pursue a different investment type, in property.
A syndicate he bought into buys commercial property. The tenant, invariably banks (they target banks) have to pay almost everything from shop fit outs, maintenance, bills etc., with only strata fee's and few others to worry about. Each investor buys a *stake* in the property. In this particular syndicate my friend has sunk a single stake, some $100k which he negatively gears. This sort of option may not be the type of growth investment that residential property has been on the east coast, but it's a genuine money spinner as rents for commercial property are freakin' ridiculous. And at small stake size bites you should be able to actually pay off your stake into positive gearing territory.
I currently have zero investments, as I'm trying to kill off the mortgage (almost there! :hyper: :partydance: ) but once I'm free I'll be enquiring into this.

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narcdor
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Re: Negative Gearing

Post by narcdor » 28 Jul 2017, 19:40

If I had a home to live in I'd be blowing the rest on basses and tacos not investing it :p
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DoctorJohn
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Re: Negative Gearing

Post by DoctorJohn » 28 Jul 2017, 23:13

narcdor wrote:
28 Jul 2017, 19:40
If I had a home to live in I'd be blowing the rest on basses and tacos not investing it :p
Bahahahaha. That's what I do. Living the slum dream. Bricks and mortar will never bring the same amount of happiness tubes and flatwounds do

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Re: Negative Gearing

Post by CyberPunkie » 11 Dec 2017, 15:10

Invest in Crypto. Now it is the time.
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Re: Negative Gearing

Post by tearalong » 11 Dec 2017, 15:36

A boy asked his bitcoin-investing dad for 1 bitcoin for his birthday.

Dad: What? $15,554??? $14,354 is a lot of money! What do you need $16,782 for anyway?
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Re: Negative Gearing

Post by packrat » 11 Dec 2017, 15:43

CyberPunkie wrote:
11 Dec 2017, 15:10
Invest in Crypto. Now it is the time.
I'd be waiting at least to see what futures trading does first. Ultimately, a currency which can't be used to pay obligations to a government fails to have some fairly important fundamentals.

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