Axing negative gearing won’t derail property investing due to a little-known tax break everyday investors are missing, claims a landlord with a $60 million portfolio.
With the federal budget focus on housing dominating the agenda, the writing is on the wall for negative gearing.
As investors wait with bated breath to how this will effect their approach, one self proclaimed “greedy landlord” claims scrapping negative gearing won’t make a difference.
Jack Henderson, who has amassed more than a staggering $60 million worth of property wealth claims negative gearing being culled “doesn’t matter” because of a “very important piece of this puzzle that a lot of people don’t understand.”
Henderson’s message on possible negative gearing changes is simple: Who cares?
“Negative gearing will be scrapped in its traditional sense. The loss won’t be able to be claimed against your taxable income … but that loss won’t be forgotten all together,” he claims.
Jack Henderson, founder of Henderson Advocacy claims with the right strategy you don’t need negative gearing. Photo: Instagram
MORE: Tax blow-up fuels record Aus landlord exodus
Greedy’: Albo’s tax reform to spark 30pc hike
Why constuction costs are about to boom
Similar to the way a company or a trust functions, Mr Henderson says you can still claim those losses, just not every single year on your taxable income like negative gearing allows.
“Instead you can carry those losses forward, and eventually offset them against any future income,” he said.
“Let’s say you own a property and over the first 5 years of ownership it costs you $20,000 per year, so over that five year period $100,000.
“Then on the sixth year, because of rental increases and maybe rates starting to come down, that property then starts to produce income, the $100,000 of losses that you accumulated in the 5 years prior, then get offset against the income that the property produces – meaning you will pay no tax on that income until you use up those losses.”
Henderson claims investors can still claim losses like a trust or company does. Photo: Supplied.
MORE:‘Illegal’: Landlord evicts renter for sad reason
He said this was “very important” going forward, because the way that investors purchase properties and the amount of time you hold them for is going to matter even more.
He warned that buying a property that had a low chance of being positively geared would put the owner at risk of “never being able to claim those losses.”
“Buying a property that you can increase the rental income on, not by a small amount, but by a huge amount will be very important,” he said.
“Because moving forward, any of those losses that accumulate in the first few years of ownership you want to be able to offset them when the property starts to produce cash flow.
Property will continue to be a growth asset as investors rely on leverage, making capital appreciation essential to justify the borrowed funds, Mr Henderson added.
“But you want to make sure you’re buying assets that you can make them as close to neutrally geared as possible, so you don’t have to worry about negative gearing changes.”
MORE:‘Risk’: Renos that devalue Aus homes by $36k
Neighbours can now fine you $340 over act
Help us improve your reading experience
Got a minute? Your feedback will help us build a better experience for you.
Help us improve this page
English (US) · 