I read this article from news.com.au about negative gearing. The relevant bit is as follows:
My question is, why is a person's tax rate applied to that net loss? My initial (and very basic) understanding of negative gearing was that the whole of that net loss (ie. the $7,000) could be used to offset your personal income tax?Again, let’s take the above example of the $200,000 investment property and how it might affect your cashflow. Let’s say you and your partner are both on tax rates of 30%.
1.Rental Income $15,000
Interest costs $16,000
Other costs $4,000
Depreciation etc $2,000
Net loss $7,000
@ 30% tax rate $2,100 refund.
Thanks for putting up with a newbie question.