What is negative gearing in the context of WA property investment?
Correct Answer
C) When the costs of owning the property exceed its rent, producing a deductible loss
Negative gearing occurs when the total costs of owning an investment property (including interest, maintenance, rates, and depreciation) exceed the rental income earned. The resulting loss can be offset against the investor's other income, reducing their overall income tax liability under Australian tax law.
Why This Is the Correct Answer
A property is negatively geared when deductible holding costs exceed rental income, and the net loss can be offset against the investor's other income.
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