An investor with several rental properties wants to maximise negative gearing benefits. Which cost can NOT be claimed as an immediate deduction against rental income in the year it is paid?
Correct Answer
C) The cost of capital improvements that add value to the property.
Capital improvements (such as renovations that increase the property's value) cannot be immediately deducted against rental income. Instead, they form part of the cost base for capital gains tax calculations when the property is sold. Repairs and maintenance can be deducted, but improvements must be depreciated over time or claimed against capital gains.
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An investor owns a negatively geared property with annual rental income of $25,000 and total deductible expenses of $35,000. If their marginal tax rate is 37%, what is their annual tax saving?
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An investor purchased a property using a 90% LVR interest-only loan at 5.5% per annum. The property cost $1,000,000 and generates $45,000 annual rent. After claiming all allowable deductions including $49,500 loan interest, what is the annual tax impact?