Most investment strategies aim to make a net profit, however tax laws allow investors to look to negatively geared properties as a means to earning capital growth on the property in the long term.
When the income generated from a property is less than the expenses, the owner will lose money due to the investment and the property is described as negatively geared. In a positively geared situation, the money earned on the property is assessable income for tax purposes. While it may seem more beneficial to pay tax on a profit, the hope of gaining capital growth on a property is enough for some investors to own a negatively geared property and benefit from a bit of a tax break.
A number of investors see negatively geared properties as beneficial because the loss can be offset against taxable income, which will change the amount of tax paid by the investor. Another benefit is that interest paid on loans for income producing properties are fully deductible along with ongoing repair and maintenance costs. These non-cash deductions aid in lowering the taxable income for the investor.
It is not recommended to invest simply for the benefit of tax deduction. As always it is important to research the property and surrounding area as well as the possible outcomes of owning a property prior to purchase.