Negatively gearing a rental property

A rental investment property is negatively geared if it is purchased with the assistance of borrowed funds and the rental income does not cover the allowable deductible expenses (interest on the home loan and depreciation). For tax purposes, the ATO allows property investors to offset an income loss (when the property costs are higher than the income generated from the investment property) against any other income, for example your wages/salary.

Some of the expenses you could claim immediately when you complete your tax return for the relevant year include:

• borrowing expenses, for example, interest on the home loan
• repair costs - maintenance and repair of the property
• depreciation of assets. Examples of assets claimable as depreciable items could include air-conditioning, dishwasher, roller-door motors, carpets 
• Property management costs
• Legal expenses associated with the preparation of leases, purchasing or selling the investment property
• Capital works deductions. It is usually spread over a period of 25 or 40 years. Deductions for capital expenditure can be applied to a variety of works, eg a building or extension - adding a garage of extra room, or alterations - demolishing or putting an internal wall or structural improvements such as a new fence or a retaining wall