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    BH-KatiesMum's Avatar
    BH-KatiesMum is offline Community Manager
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    Quote Originally Posted by witherwings View Post
    I don't believe that one group is necessarily smarter at investing than another. No.

    But if you're a taxpayer and you have a positively geared property, you probably made a better investment decision somewhere down the line than the person who is making tens of thousands of dollars of losses every year. Sure you get a tax break, but you're still making a loss. A small detail that a lot of people overlook when they get excited about their huge tax refunds.
    Most of what you say is correct - but some of this isnt quite.

    For many people, the negative gearing comes not from the cash flow but from the rental deductions due to depreciation and capital works. That can take a property which is cash flow positive to being a net rental loss for tax pretty quickly.

    Depreciation allowances are significantly higher for new buildings, and for townhouse type buildings with a lot of 'house' and not much land. The deduction can be $20 or $25k pretty easily for these properties.

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    Quote Originally Posted by BH-KatiesMum View Post
    Most of what you say is correct - but some of this isnt quite.

    For many people, the negative gearing comes not from the cash flow but from the rental deductions due to depreciation and capital works. That can take a property which is cash flow positive to being a net rental loss for tax pretty quickly.

    Depreciation allowances are significantly higher for new buildings, and for townhouse type buildings with a lot of 'house' and not much land. The deduction can be $20 or $25k pretty easily for these properties.
    Depreciation is still an expense, even if it's not a cash expense. It just means you paid a high premium for someone else's renovation, and now that renovation or new asset is losing value. Alternatively you can spend less $ on an older place and claim less depreciation while having exactly the same % in capital growth.


 

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