Negative gearing is one of the most effective ways to reduce the amount of tax you pay whilst creating future wealth. Negative gearing most commonly occurs when you borrow money to purchase an asset (such as an investment property or shares) and the income generated is not enough to cover the interest on the loan. This can be a very effective form of leverage, and often results in lowering taxable income. Negative gearing does not necessarily mean negative cash flow.
For example, depreciation deductions and other non-cash costs associated with an investment property can result in the property being cash flow positive, but for tax purposes, negatively geared. This can help generate a positive tax outcome.
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