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Negative Gearing

Discussion in 'Investing Glossary' started by Glossary, 27th Sep, 2006.

  1. Glossary

    Glossary Active Member

    Joined:
    12th Sep, 2006
    Posts:
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    Definition:

    Negative gearing is the term used to describe the process of writing off the losses incurred on an investment (such as the council rates and interest payments on a loan to purchase an investment property) against other earned income, thus resulting in less income tax being paid.

    An investment will be negatively geared where the interest costs and other expenses associated with holding the asset exceed the income generated by the asset. The goal is, therefore, to invest in assets where the capital growth far exceeds the accumulated negative gearing losses after tax benefits.
     
    Last edited by a moderator: 27th Oct, 2006