Ep 423: Negative gearing deferred- heres how to manage the cash flow gap
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Quarantining negative gearing doesn't just reduce a tax benefit; it can blow a hole in an investor's cash flow. Take a property with a $30,000 annual shortfall: previously, offsetting that loss might have clawed back $12,000–$14,000 in tax, bringing the real cost to around $16,000–$18,000. Now that loss must be carried forward, potentially for 10 to 20 years, leaving the investor to fund the full $30,000 upfront. For many, that makes established property simply unaffordable.
In this episode, Stuart explores a financing structure to bridge that gap, borrowing the negative gearing benefit you no longer receive upfront, and repaying it when the deferred deduction is eventually realised. The goal is to align your cash outlay with the timing of the tax benefit, rather than paying years ahead of it. Crucially, it also frees investors to focus on asset quality rather than chasing yield in inferior locations.
He's characteristically balanced: this isn't a case for property over shares (which remain more effective), the numbers involve real trade-offs (a higher return but roughly 15% less wealth in dollar terms), and it demands equity, discipline and the right temperament. Get personalised tax and credit advice before acting.
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This podcast provides general information about finance, tax and credit. It doesn't take into account your specific objectives, financial situation or needs, so you need to assess whether it's relevant to your circumstances before acting on it. If you're not sure, speak to a licensed, trustworthy professional.
