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Determine the amount of annual capital gain

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Reference no: EM132741670

The following details relate to the negative gearing of a rental property:

  • Purchase property for $810,000
  • Borrow $650,000 @ 5.25% p.a.
  • Net rental income is $23,500 p.a. (after all operating expenses, but before interest)
  • Property holder's marginal tax rate = 45% (+ 2% Medicare Levy)

Problem 1: Determine the (%) amount of annual capital gain that would need to be earned on the property for this negative gearing strategy to be profitable. [You will first need to determine the net after-tax cost of the negative gearing strategy].

Reference no: EM132741670

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