Hi.  I am planning on getting into negative gearing (and yes
Rod, you can negative gear shares, read More Money with
Noel Wittaker page 207 "The effectiveness of negative gearing
depends on the investor being able to claim the interst as a
tax deduction.  For this to happen, the asset purchased must
produce assessable income.  Obviously the family home, as
well as gold, insurance bonds, stamps, coins, cars and 
jewels are out, so what is left - income producing property
and shares."

Anyway, I pay about 40% marginal rate in tax for the amount 
that negative gearing would be operating on.  Anyway, in
order to do some realistic calculations, I need to know
approximately the following figures (approximations, best
guesses, averages, etc are better than nothing).  I have
put my guesses after them.  Looking for an average over
5 years.

Interest rate: 10%
Inflation:     4%
Shares (dividend + capital): 11%  (4% + 7%)

My plan is to do this.  Go to Westpac and borrow $50,000 at
home loan interest rates (8.75%) interest only.  They will
just squeeze me in for that amount.  The loan costs $100
establishment fee plus $200 stamp duty plus $4 for a piece
of paper.

I'm then going to invest my money in BT something-or-other
unit trusts.  I can switch between the split-fund growth
and split-fund income for free whenever I want.  I am
likely to make a switch to split-fund income if I am out
of work and need as much income as possible.  BT have an
entry fee of 5%, 4% brokerage, 1% for them.

I am going to go to Ponts Securities who refund 75% of the
brokerage fee, or 80% if more than $50,000.  I will get the
refund converted into more unit trust units.  In effect,
I will be up for 1% of $50,000 plus 20% of 4% of $50,000,
which ends up being $900.  

$900+$304 = $1204, so I make a 2.4% capital loss initially.

Now, to calculate a typical year, I am paying

Interest = $5,000
Dividends = 4% * $50,000 = $2,000
Loss = $3,000
Tax Benefit = 40% * $3,000 = $1,200
Franked Dividends = 30% * $2,000 = $666
Total Tax Benefit = $1,200 + $666 = $1,866
Loss (to me) = $3,000 - $1,866 = $1,134
Capital Gain = 8% * $50,000 = $4,000
Profit = $4,000-$1,134 = $2,866

% after tax profit = $2,866/$50,000 = 5.73%
% after inflation profit = 1.73%
Capital gains tax on sale = 0 (sell when unemployed/retired).

So basically I get to make 1.73% * $50,000 = $865/year tax 
free, using someone else's money.  Hopefully shares will be
more than 1% above the interest rate (past figures are what,
3%?), so I'll make another 2% * $50,000 = $1,000/year.

Comments, anyone?  BFN.  Paul.
@EOT:

--- Mksmsg
SDŽ¯0b