Buying a rental property in Perth? The negative gearing option explained…
Perth people love to invest in bricks and mortar for a number of reasons.
Some venture into the rental property market because they like to touch and see what they’re buying; others trust in the value of properties continuing to increase over the longer term.
Rental property is particularly attractive because the Australian Tax Office allows you to turn a negatively geared property into a positive cash-flow situation.
But if you’re considering the benefits of negative gearing in Perth, get the right advice and make sure you understand what it means, inside out…
What is negative gearing?
Negative gearing occurs when tax accountants find that the net rental income after deducting expenses is less than the interest on the borrowed funds.
Basically, the investor ends up with a net rental loss at the end of a financial year.
How does negative gearing work for Perth buyers?
With the right negative gearing advice, you will be able to offset the total cost of owning property in Perth against assessable income.
This applies if the cost is higher than the rental income. The revenue will only become subject to tax after the rent has covered the cost of acquiring the property.
The tax benefits of negative gearing
Here are just some of the typical expenses that can be claimed with negative gearing:
- Interest on an investment loan
- It is fully deductible
- Shortfalls are offset in an individual’s taxable income, including rent and salary
- Ongoing repairs and maintenance
- These expenses are fully deductible
- Property fixtures and fittings
- They are treated as plant
- Based on its effective life, a deduction for depreciation is allowed
- Capital works
- Major additions on construction receive a capital works deduction of between 2.5% and 4% per year
- The percentage is applied to the initial cost until it is exhausted
- The amount claimed reduces the cost base for capital gains
- Property sale
- The capital gains on the proceeds are taxable, less the costs
- The net capital gain will be taxed as income
- If the asset was held for one year or more, the capital gain is first discounted by 50%
Investment advice for Perth property owners
Are you a property owner interested in the best tax planning service available in Perth?
If you’re looking to minimise your tax payments, Ascent Accountants is a certified, Perth-based accountancy firm providing a full accounting and business management service.
Call us on 08 6336 6200 to discuss solutions for your small, medium or family-owned/operated businesses.
Need help with your accounting?
June is zooming by! Here’s another handy checklist for business owners—let’s get you sorted for EOFY and tick off those to-dos.
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Whether you're a first-time landlord or managing multiple properties, understanding what you can claim at tax time can make a big difference to your bottom line. In our latest blog, we break down the most common (and often overlooked) deductions.
Buying and selling property rarely lines up perfectly. The logistics of it all can be incredibly stressful. If you’ve found the perfect next home but haven’t sold your current one yet, a bridging loan can make your move easier, without having to wait on your current property sale. What is a bridging loan? A bridging loan is a short-term loan that gives you the funds to buy a new property before your current property has sold. It’s designed to bridge the gap between buying and selling. These loans are generally interest-only and are typically offered for up to 12 months, giving you time to sell and settle on your current home while already owning the next one. When would I need a bridging loan? You might consider bridging finance if: You’ve found your next home but haven’t yet sold your current one. You want to avoid renting or moving twice between sales. You want more time to prepare your home for market to get the best sale price. You're building a new home while still living in your existing one. How does it work? Peak Debt: The lender combines your current mortgage, the cost of the new property (including stamp duty and legal fees), and any interest (if it’s being capitalised). This total is known as your Peak Debt. Interest Only: During the bridging period, you’ll typically pay interest only — or the interest may be capitalised (meaning it’s added to your loan rather than paid upfront). Sell Your Property: Once you sell your existing home, the sale proceeds are used to reduce your Peak Debt. End Debt: The remaining balance becomes your End Debt, which then continues as a standard mortgage. An example of a bridging loan. Your current home loan = $200,000 New home = $800,000 Total bridging loan (Peak Debt) = $1,000,000 After selling your home for $600,000, that amount is used to pay down your loan Remaining loan (End Debt) = $400,000 Things to consider. Like any major financial decision, it’s important to understand all the moving parts before you commit. Time pressure: You typically have 6–12 months to sell. If you don’t sell in time, the lender may step in to sell the property and/or charge default interest. This is an extra interest rate that a lender charges when you fail to meet your loan obligations — in this case, not selling your property within the agreed timeframe. Interest costs: If interest is capitalised, it means you're not making repayments during the loan period, so the interest gets added to the loan balance instead of being paid separately. This means your loan grows each month. Making even small repayments can help keep this under control. Equity & serviceability: Lenders will assess how much equity you have and whether you can manage the loan during the bridging period. Loan-to-value ratio: If your End Debt ends up being more than 80% of the new property’s value, you may have to pay Lenders Mortgage Insurance (LMI). Existing loan setup: If your current lender doesn’t offer bridging loans, refinancing may be required — sometimes triggering break fees if your existing loan is fixed. This means you may have to pay a penalty if you end a fixed-rate home loan early (before the agreed term is up). Is a bridging loan right for you? That’s the big question. Bridging finance can offer flexibility and peace of mind, helping you move forward with confidence rather than being held back by uncertain sale timing. But it’s not without risk or cost — so it’s vital to understand the structure, timeframe, and repayment expectations. If you’re considering your next property move and want tailored advice on whether bridging finance suits your situation, talk to the team at Ascent Property Co. or Ascent Accountants. We can also put you in touch with finance brokers to discuss what is best for you.
That work perk might be costing you more than you think… Fringe Benefits Tax (FBT) is charged at a whopping 47% — the same as the top personal tax rate. That means lower salary or fewer benefits. So, while salary packaging can save tax, in many cases it ends up costing you more.
If you’re expecting a higher income this financial year, now is the time to act. We’ve put together 9 Smart Tax Planning Tips that could save you thousands — but they only work before 30 June.
