I am buying an investment property and want to take advantage of negative gearing. I have applied for a loan but the finance company are really slow and may not get the loan documentation ready by the settlement date.
I do have the funds to pay for the investment property outright, however, I would like to take advantage of negative gearing by taking out an investment loan and use my savings for other purposes.
If I paid outright for the property using my money at settlement and when the loan funds come through, have them paid to me (effectively re-financing my own funds), can I still claim the interest on this loan?
The purpose of the loan has always been to buy the investment property, it's just the timing of everything that has gone awray
I think the problem is that many people confuse the actual nature of negative gearing.
I have seen/read quite a few people that think that their tax liability is reduced by the whole of the interest ($8000) and not just the their top tax bracket multiplied by the interest ($2,790) as described in your example.
Also they seem to think that if the situtation is a posively geared loan or they own outright that paying tax makes it bad actually earning a profit upfront.