SMSFs Negative Gearing

Not many realise but a SMSF can negative gear property, and even shares potentially.

It works the same way inside a SMSF as outside. Any loss from an investment can reduce the taxable income of the fund which saves tax on that income.

Example

A SMSF has a property with a $15,000 loss after all expenses are taken into account.

The member of the fund contributes $20,000 into the fund in the form of compulsory employer contributions. This is normally taxed at 15% which would be about $3,000 in tax.

But with the loss from the property the income of the fund becomes $5,000 (-$15,000 + $20,000 = $5,000).

The tax on $5,000 would be $750.

So, having the property would be saving the fund $2,250 in tax in that year.

Note that I am not suggesting that I think property in a SMSF is a good investment.

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