Not so long ago on The Mortgage Busters Show we ran a segment on negative gearing and the response was incredible. Given, in a lot of cases we can put a client into an investment property for about $20 to $30 per week depending on your tax rate. That’s les then 10 coffees per week.

There has been a lot of talk in the media over the past year about negative gearing and some commentators are saying it should be abolished. With some comparisons being made to other countries such as the USA who currently do not allow negative gearing as a tax allowance.

It is naïve to just take one part of another countries tax system and compare to Australia’s without comparing all the parts. For example in America you can claim your interest payment made on your own home and there are other differences throughout the worlds many countries and their different tax regimes.

The first thing to acknowledge when it comes to investing in property it is a business. Once that concept is acknowledged and the blinkers have been removed it makes the negative argument fairly simple to review.

Business decisions are generally not based not emotion, they are based on facts and figures namely return on investment, the bottom line. Similarly all other reasoning or arguments regarding negative gearing should be based on what you can do as if you are running a business.

As a business owner whether you are a sole trader or a national conglomerate the Australian taxation system provides you with some basic rights to claim certain costs against the revenue the company makes.

So let’s look at the basic costs a company can claim when it comes to reducing tax. Apart from running costs such as wages, rent etc. a company can claim interest on any loans and depreciation on any assets owned. The assets are generally items such as vehicles, machinery and any other plant and equipment used in the business.

No difference to owning a property, it is a business and you are entitled to claim expenses against revenues received i.e. rent. Generally the two biggest claims you can make when owning an investment property, apart from some initial acquisition costs, are the loan interest and depreciation of the building, fixture and fittings. Off course there are other charges such as rates, insurances and some maintenance that are tax deductable.

While owning an investment property is a business, it should have all the rights to claim deduction as any business in Australia.

Until next time…Live Your Life
Steven Hudson from as seen The Mortgage Busters Show