When a property is negatively geared, it means the income from the property is less than the expenses, creating a loss on paper. If the property is in your individual name (or jointly with a spouse), this loss can offset your taxable income from employment or business. As a result, you’ll pay less tax—a key advantage of property investing.
Owning a property in a trust works differently. A trust is a separate entity, and any loss from a negatively geared property stays within the trust. Unlike individual ownership, the trust cannot distribute the loss to offset other taxable income. Instead, the loss accumulates within the trust year after year.
While you don’t get an immediate tax benefit, the accumulated losses in the trust can be used in the future. When the property becomes positively geared (when its income exceeds expenses), those accumulated losses can offset the profits. This reduces or eliminates the tax you’d normally pay on the positive income.
In essence, the tax benefit isn’t lost—it’s just delayed. For some, this delay can be advantageous. As your earning capacity grows over time, deferring the tax benefit may align better with your financial goals.
Choosing the best ownership structure depends on your individual circumstances. Speak to your accountant to ensure your structure aligns with your property’s financial performance and your long-term goals. Whether you’re starting out or expanding your portfolio, professional advice is key.
