Gearing

Gearing, also known as ‘borrowing to invest’ or ‘leveraging’, is a strategy of using borrowed money to purchase investments.

Negative Gearing

- when the costs of investing are higher than the return you achieve.

• Most advantageous for high-income earners because they are in the top tax bracket
• Losses can be offset against other assessable income
• Investor must be able to fund short-fall in investment until asset is sold

Positive Gearing

– is when the income return you achieve covers more than the costs of investing.

• Enables investors to pay off investment faster by using the excess income to repay loan
• Creates a situation where tax must be paid on net income

Talk to us about how Gearing can effect your investment position and tax position.

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