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How much tax do I pay on my income? Click here to visit the A.T.O. simple tax calculator Click here to visit the A.T.O. comprehensive tax calculator
Is negative gearing risky? Gearing investments or borrowing money to invest allows you to magnify the returns made on your investments. Returns can be both negative and positive. Negative gearing means that the income produced from the investments is less than the interest and costs paid on the loans and investments. You are able to claim this amount as a tax deduction. High levels of gearing have the most risk as you need to make a larger capital gain on the eventual sale of the investment to make a profit. The risk of gearing can be reduced by decreasing the levels of borrowing and using more of your own equity in investing. This may lead to your gearing becoming neutral or positive in that the income produced is greater than the costs paid.
What are Managed Investments and Direct Investments? Managed Investments Managed investments are where you would invest the funds with a Manager and with a specific product. The product could be a sharemarket trust. All investor’s funds are pooled and then professionally managed. That is, the fund manager chooses what shares to buy, what price and when to sell etc. You as the investor should receive regular reports and hopefully a cheque representing your share of profits. You personally do not actively participate in the investment. Fund managers are considered to be experts and deal specifically with the portfolio (eg: shares) on a full time daily basis. They are meant to predict and react to market forces etc. The manager charges a fee for this service which is usually a percentage of total assets plus a percentage of funds invested at the commencement. Direct Investments This means that you physically do the investment, paperwork and the managing of the investment. An example would be the purchase of a rental property. You look for and choose the property to be purchased. You then appoint a real estate agent or alternatively advertise for tenants yourself, arrange repairs etc. Similarly with a share investment, you decide which company to invest in, at what price, when to sell etc. Whilst this may sound onerous, you would have some resources available to you such as Stockbrokers advice etc.
Which is the best way to go – lease or hire purchase for equipment finance? Link to Lease and Hire Purchase Calculator
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