Positively Geared Cashflow but Negatively Geared for Tax

• 

  dasher86 on 18/04/2016 - 12:55

  +4

  You will receive more cash inflow than outflow as your cash receipts (rent) will be greater than your cash payments ('cash' expenses).
  Though your cash inflow is greater than your cash payments your profits will be negative most likely due to non-cash expenses (depreciation).

• 

  tomleonhart on 18/04/2016 - 13:07

  +10

  For example sake:

  You receive 20k rental income

  Your interest bill for the FY is 15k
  Your maintenance expenses is 2k
  Your depreciation schedule for this FY is 5k

  So although your cash flow is positive (20k - 15k - 2k) = 3k.

  You are still negative gearing your property because your combine expensese 15+ 2 +5 = 22k.

  Hope this helps.

  • 

    sheya on 18/04/2016 - 16:38

    thank you that helps

  • 

    moonphase on 18/04/2016 - 17:47

    This may sound stupid but is it totally up to you on how much you are going to depreciate it per year?

    • 

      danyboy on 18/04/2016 - 18:27

      The government has depreciation tables for all sorts of stuff (for tax purposes). I presume property is included in some sub-category there?

      • 

        moonphase on 18/04/2016 - 20:43

        I see. Thanks for the answer.

        So I thought only the properties on mortgage could be the only way for negative gearing but it sounds like even if you own it, you might be able to do above if the one can depreciate the property as well…

        I was curious on this because when you buy the house, the value is for the house + land and I couldn't think how to depreciate it.

      • 

        CheapskateQueen on 19/04/2016 - 23:17

        @moonphase: if you own your investment property outright with no loan and you're getting rent, it'd be very unusual for depreciation alone to cause you to ce negatively geared.

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  CyberMurning on 18/04/2016 - 13:56

  +1

  the opposite is
  Negatively Geared Cash Flow but Positively Geared for Tax

  example: NRAS properties