Negative gearing of a Queensland investment property means that:

Q: What is the correct answer to: Negative gearing of a Queensland investment property means that:

The correct answer is The rental income is less than the deductible expenses, creating a tax loss that can offset other income. Negative gearing occurs when the deductible costs of owning an investment property (mortgage interest, maintenance, depreciation, insurance, etc.) exceed the rental income. The resulting tax loss can be offset against the investor's other taxable income, reducing their overall tax liability.

Q: What background knowledge is needed for this Finance Taxation question?

Negative gearing is permitted under Australian federal tax law (not state law). Investors accept short-term rental losses in exchange for tax benefits and expected long-term capital growth. The strategy relies on the property's capital gain eventually exceeding the accumulated losses.

Q: What is a good way to remember the answer to this Finance Taxation question?

NEGATIVE gearing = expenses are MORE than income, creating a LOSS. That loss offsets your other taxable income. Investment property losing money? If expenses > income, it is negatively geared — the loss reduces your tax bill.

Q: What exam tip applies to this Finance Taxation question?

Negative gearing is about the income-expense relationship, not property value. Expenses > Income = negatively geared.

Q: How does this Finance Taxation concept apply in Australian real estate practice?

An investor's rental property earns $30,000/year in rent but costs $45,000/year in mortgage interest, maintenance, insurance, and depreciation. The $15,000 loss is offset against the investor's $120,000 salary, reducing their taxable income to $105,000.

Question

Finance TaxationQLDMEDIUM

Negative gearing of a Queensland investment property means that:

Answer Options

A

The property is decreasing in value

B

The rental income is less than the deductible expenses, creating a tax loss that can offset other income

C

The mortgage has been fully repaid

D

The property is exempt from land tax