Retirement
How to decide if negative gearing will pay off
Going into debt or putting in place a negative gearing strategy is a popular wealth-building strategy for many Australians. However, some experts believe there are other options long-term investors should weigh up.
How to decide if negative gearing will pay off
Going into debt or putting in place a negative gearing strategy is a popular wealth-building strategy for many Australians. However, some experts believe there are other options long-term investors should weigh up.

Negative gearing, particularly with property, can be an effective strategy for investors if the value of the property appreciates enough over time to deliver a strong capital gain.
However, as wealth management partner at HLB Mann Judd, Jonathan Philpot, points out, this isn’t always the case, as many investors have experienced during current market freefalls.
For Mr Philpot, these investors with long-term aspirations could be exploring other tax-effective vehicles at their disposal, like superannuation.
“Using gearing to build wealth can be risky, and negative gearing into property carries a higher risk without a guarantee of a greater return opportunity.

“A negative gearing strategy can pay off... but this isn’t always the outcome. And the capital costs of running and maintaining an investment property can be high,” said Mr Philpot.
Considerations for super savings
Given the restricted concessional contribution limits of $25,000 a year that applies, investors cannot deposit a large sum into super.
Rather, investors should view this as a long play, as they would with property investment.
“One smart strategy is to begin this from the age of 40, with the aim of building a super fund up to the $1.6 million balance cap limit,” said Mr Philpot.
Myth busting
Many Australians view superannuation as an illiquid asset, as it is locked away until retirement.
However, Mr Philpot reminds investors that by comparison, property also doesn’t have a high liquidity value.
“Property is an illiquid asset and investors can only access the capital upon the sale of that property,” he said.
“The income generated from rental is generally low – often at around 3 per cent per annum or less – and this income is often being utilised to meet loan repayments,” he said.
“For a property investment to achieve its potential, it should be at least a 10-year holding, meaning the wealth invested in a property can also be viewed as locked away,” he said.
Nestegg readers also give thought to the labor's new policy about negative gearing labor for the year 2020.
About the author

About the author


Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more

Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more

Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more

Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more

Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more

Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more

Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more

Superannuation
Rest welcomes progress on ‘Payday Super’ reform
Rest, one of Australia’s largest profit-to-member superannuation funds, has welcomed the Australian Government’s release of draft ‘Payday Super’ legislation, which aims to align Superannuation ...Read more

Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more

Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more

Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more

Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more

Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more

Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more

Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more

Superannuation
Rest welcomes progress on ‘Payday Super’ reform
Rest, one of Australia’s largest profit-to-member superannuation funds, has welcomed the Australian Government’s release of draft ‘Payday Super’ legislation, which aims to align Superannuation ...Read more