What is Negative Gearing?
Negative gearing is a financial strategy popular among Australian property investors. It occurs when the costs of owning an investment property, including mortgage interest, maintenance, and depreciation, surpass the rental income generated. This loss can be deducted from your taxable income, leading to lower overall tax liabilities. Investors anticipate that property values will appreciate over time, thus offsetting initial losses, making it a widely-used strategy in real estate.
Tax Benefits Beyond Property: Shares and Their Advantages
While negative gearing is traditionally associated with property, those investing in shares can also leverage significant tax advantages:
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Interest Deductions: If you borrow funds to invest in shares, the interest on that loan may be tax-deductible, provided the shares yield assessable income, like dividends.
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Franking Credits: Many Australian companies pay dividends along with franking credits. These represent tax already paid at the corporate level and can reduce your tax liabilities, potentially resulting in a refund.
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Capital Gains Tax (CGT) Discount: Holding shares for longer than a year qualifies you for a 50% CGT discount on any profits made during the sale.
These benefits can significantly bolster after-tax returns, revealing why some investors are just as keen on shares as they are on property.
Comparing Property and Shares
When considering the investment landscape, both property and shares present unique benefits:
- Property: Delivers tangible assets, potential rental income, and the allure of negative gearing.
- Shares: Foster liquidity and diversification while providing tax perks such as franking credits and CGT discounts.
Deciding between these asset classes largely hinges on personal financial goals, risk appetite, and timelines. Conducting thorough research and analysis is crucial in making an informed decision.
Why ActOn Wealth Can Help You
At ActOn Wealth, we recognize the complexities that accompany investment strategies and taxation. Our dedicated team can assist in:
- Evaluating the compatibility of property and share investments concerning your financial ambitions.
- Tailoring superior tax strategies that maximize your after-tax returns.
- Curating a diversified portfolio that aligns with your comfort level regarding risk.
Our Comprehensive Services
Property Investment Advice
Investing in real estate is in the DNA of many Australians. Whether you're looking to buy your first property, upgrade to your dream home, or expand your portfolio, our experienced financial advisors in Melbourne are ready to turn your goals into reality.
A Complete Guide to Real Estate Investment Trusts (REITs)
For those keen on passive income without the hassles of direct property management, REITs can be an attractive alternative. Our team offers in-depth discussions about REITs and their role in wealth creation, equipping you with essential insights.
How to Begin Investing in Shares
If you're contemplating investing in shares but don't know where to start, you're embarking on an exciting journey. We’re here to guide you through every step, ensuring you feel equipped as you step into this new venture.
Get Started Today
Deciding whether to invest in property or shares is pivotal for your financial future. While both routes have compelling merits, ActOn Wealth is here to guide you toward the best investment strategy tailored to your unique situation.
Contact us today to schedule a consultation and take a proactive step toward securing your financial success.
