Gearing: Using Borrowed Funds to Make Investments
Gearing in superannuation Sydney may be an attractive option
Gearing involves using borrowed funds to make investments in assets such as property, shares or an investment portfolio. Also, gearing in superannuation. Sydney siders, as well as investors countrywide, can find these options attractive because loan expenses and interest costs can often be claimed as a tax deduction.
Gearing can be a tax effective way of creating wealth over the longer term. Greater investment returns can be achieved provided that the total return produced by your geared investment portfolio exceeds the costs of the borrowing. Investment return refers to income produced e.g. interest, dividends and rent and capital growth i.e. the underlying value of the investment increasing in value.
Negative gearing is a term which applies when the cost of borrowing i.e. loan interest and other costs, exceeds the income generated from the geared investments. The loss can normally be used as a tax deduction by the investor to offset other taxable income such as salary.
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