What is the Future of Negative Gearing for Expat Investment Property in Australia?
Negative gearing. It’s a crucial tax-related factor that expats may have heard about when considering investing in an investment property in Australia.
If you’ve heard of negative gearing, you’ll already recognise that it has plenty of advantages for expats. If you’re not sure about what negative gearing is, it’s time to find out how it relates to property investment!
This Odin Mortgage article contains the essential information you need when it comes to the future of negative gearing and investment property as an Australian expat or an expat wanting to return to Australia.
What is a negatively geared property for tax purposes?
A negatively geared property is a property from which investors can deduct accrued costs or expenses from their taxable income in situations where the costs are greater than rental income amounts.
If you’re a property investor and have an Australian investment property you can balance out losses from investment costs with capital gains tax reductions when tax time comes.
So, if you’re an Australian expat who lodges a tax return every year and have recorded losses made on investment property or Australian investment properties, this can be balanced with negative gearing methods.
Here is a quick example of how negative gearing works for tax purposes.
- Your income or yearly earnings are $114,000.
- You pay tax in the amount of $29,000 (PAYG).
- Your annual investment property rental income is $36,000.
- The tax-deductible expenses are $51,000 each year.
- Your taxable income is reduced to $99,000
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What is the future of negative gearing for expat property investments?
Although the Australian Labor Party proposed changes to negative gearing, such as the fact that property investors wouldn’t be able to write off losses made from an investment property against their paid tax when they buy an existing Australian property, these policies have not taken effect. The Australian Labor Party has dropped the policy.
Will negative gearing continue to be available in Australia?
Yes, negative gearing will still be around in Australia for years to come. It’s applicable to housing or property and other investment types as well. However, if Labor’s policies resurface and are put into action, it’s expected that negative gearing will only apply to newly constructed properties.
Have there been any proposed changes to discounts on capital gains tax?
Although there have been some changes proposed to discounts on capital gains tax, with some Australian government parties wanting to halve the discount for CGT to 25%, the 50% capital gains discount still applies when you own your property for longer than 12 months.
If I negatively gear my property but have no other Australian income what does this mean for tax losses?
You might be a non-resident looking to negatively gear investment property, and as an Australian expat, you can benefit from these tax credits that are carried forward indefinitely under Australia’s tax legislation.
Therefore, even if you have no other Australian income, you can still get the tax benefits of negative gearing in the future.
Tax deduction and rental properties
It may be the case that your only investment income that comes from Australia is your rental property income. In this case, if you make a loss, you can carry losses forward to the following tax year.
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Get the benefits of negative gearing for expat investment property in Australia
Negative gearing has some key advantages for property investors, so it’s worth investigating if you have an investment property.
To keep an eye on how negative gearing policies may change in the future, the current changes to the property market, and professional advice on Australian real estate stick with Odin Mortgage for the most recent updates and updates on expat mortgages.
What Is The Future Of Negative Gearing For Expat Investment Property In Australia FAQs
Can I negatively gear share investments as a non-resident?
Unfortunately, non-residents cannot negatively gear share investments or claim interest expenses because no extra or other costs are available to offset against them. The main reason for this is that as a non-resident you will not be subject to capital gains tax (CGT) on share investments.
Even in the event that you’ve borrowed the funds to invest, you cannot negatively gear share investments, whereas Australian tax residents can deduct the interest paid during a home loan term for loans they used to buy investment shares.
How effective is negative gearing as a strategy?
As an expat although you won’t benefit from capital gain tax exemptions of you live overseas and sell your property when you live abroad, you can negatively gear an investment property as an effective strategy if you have plans to return to Australia.
Why should I choose negative gearing as a strategy?
Negative gearing is a shrewd, long-term strategy for offsetting a loss when you choose to sell an asset or want to reclaim expenses for a rental property. It’s an ideal strategy as you can save on your Australian taxes, especially if you have a high income.
Can I claim my foreign income for negative gearing?
Some bad news is that you cannot claim your foreign income for negative gearing purposes. It’s only possible to claim taxable income and tax paid in Australia.