negative gearing Australian expats

How does negative gearing work for Australian expats?

If you’ve paid attention to the news lately, you’ve no doubt heard the term “negative gearing”. It has become somewhat of a political football – with the Liberal and National parties supporting current arrangements, while Labour intends to change it. But what exactly is negative gearing and how do the rules apply to Australian expats?

Negative gearing 101

Negative gearing is a practice whereby an investor borrows money to purchase an income producing investment (i.e. a property or shares). It is a form of financial leverage, in which the investor expects the investment’s future growth to outweigh the cost of ownership.

Costs of owning a property

These costs include cash and non-cash deductions. Cash deductions include interest on home loans, property management fees, body corporate fees, maintenance costs, insurance and more. Non-cash deductions include things like rental property depreciation, where you can claim tax deductions on the loss of value of any property improvements.

Can Australian expats negatively gear?

According to the current negative gearing rules, if you are a non-Australian resident for tax purposes, you are allowed to negatively gear property investments. Put simply, as an expat, you can use any tax losses on Australian property investments to reduce your taxable income from other income sourced in Australia.

In addition, if your tax losses exceed your Australian sourced income, these losses can be carried forward to future tax years.

What about share market investments?

If you are a non-resident for tax reasons, you can no longer negatively gear your share market investments. In fact, you cannot deduct any costs associated with investment in shares. However, you can add these costs to the cost base of your investment, to reduce future capital gains in tax liability.

How can you reap tax benefits?

A simple way to maximise the benefits you can attain through negative gearing and associated tax benefits is to maximise your depreciation deductions. These include the cash and non-cash deductions mentioned previously.

If you’d like more information on how current negative gearing rules affect Aussie expats, simply call or email the team at Expat Tax Services today.

Shane Macfarlane
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Shane Macfarlane

CEO & Founder at Expat Tax Services
Shane's an Australian Chartered Accountant and Australian expat tax specialist who's also an expat himself (based in Asia).Shane's passionate about tax and legitimate tax minimisation, particularly as it relates to Australian expats who are often subject to high rates of tax back home in Australia.Beyond tax and accounting, Shane's an entrepreneur, having devised, created and founded a successful accounting startup, Fifo Workpapers (acquired by accounting software giant, Intuit inc. in 2013)

In short Shane's a tax and software techno-geek, who recognised that Australian expats were unable to obtain the specialist advice and quality service, that they needed from their accountants. Accordingly, Shane founded Expat Tax Services to provide Australian expats with access to specialist, quality advice at fair and reasonable prices (no hourly rates, fees quoted upfront with unlimited support included) . . . receive the support and advice you need without having to take second-mortgage to pay your accountant's bill! Speak to Shane & the team today.
Shane Macfarlane
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