Cash flow example

Let's say you have an investment property worth $500,000 and an interest only loan of $400,000 with an interest rate of 4.5% p.a.

You receive rent of $350 per week and have property expenses of $4,000 p.a. Your cash flow for the investment property is shown in the table.

You earn $105,000 p.a. and you are in the 30% marginal tax rate bracket, plus the Medicare levy.

You may be able to reduce the tax on your other taxable income by the loss from this investment property (see Tax and Structures module).

As your marginal tax rate is 30%, your tax could be reduced by $1,140 (30% of $3,800).

Therefore your loss after tax is $2,660 ($3,800 - $1,140). Allowing for Medicare saving may reduce this loss further. 

This is the amount you are out of pocket.