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6 Debt Management and Leverage

Negative gearing and capital gains

Many people use negative gearing as a tax driven wealth accumulation strategy.

However, at the end of the day you still want to ensure that you are making a profit.

So if you are making a cash flow loss each year, and consequently reducing the tax that you pay, you still need the investment to grow in value to compensate you for the overall ongoing cash flow losses.

This is best illustrated by an example on the next page.

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