Negative gearing explained in plain English
It gets thrown around at barbecues as though it's a plan. It isn't. Here's what negative gearing actually is, and what it isn't.
What the term means
A property is negatively geared when the deductible costs of holding it — loan interest, management fees, rates, insurance, maintenance and the like — add up to more than the rent it brings in. The shortfall is a loss, and under current Australian tax rules that loss can generally be offset against your other income, which reduces the tax you pay.
That's the whole idea. Rent in, costs out, and if costs win, the difference has a tax consequence. Nothing more mysterious than that.
Why it isn't a strategy by itself
A deduction gives back a portion of a loss based on your marginal tax rate — not the whole loss. If a property costs you $10,000 a year out of pocket, you are still out of pocket after the tax benefit. You're paying real money each week in the hope the property grows in value enough to make that worthwhile.
So the honest question isn't "is it negatively geared?" It's "will this asset grow, and can I comfortably fund the shortfall for as long as it takes?" Buying something weak because it produces a deduction is how people lose money slowly.
Cash flow is the thing that breaks people
Tax benefits usually arrive once a year. Rates rises, vacancies and repair bills arrive whenever they feel like it. Households that get into trouble are almost always households that budgeted for the average week rather than the bad quarter.
Before taking on a geared property, work out what the weekly shortfall looks like if rates move up, the property sits empty for a month, and something expensive breaks. Our holding costs estimator is a rough place to start.
Positive gearing and the middle ground
A positively geared property brings in more rent than it costs to hold. That's easier on the household budget, though the rental income is taxable and such properties often sit in markets with different growth characteristics. Neither approach is automatically better — they suit different incomes, ages and risk appetites.
The rules can change
Negative gearing is a policy setting, not a law of nature. It has been debated repeatedly in Australia and the detail can shift. Check current ATO guidance, or ask a registered tax agent about the settings that apply for the 2026–27 year, before you build a plan around it.
Nothing here is personal tax advice. We're a lead-generation platform: we generate interest and pass your enquiry to independent property specialists who work under their own licences.
Common questions
Is negative gearing a strategy?
No. It is a tax treatment that applies when the deductible costs of holding a property exceed the rent it earns. Whether that suits you depends on your income, cash flow and goals.
Does negative gearing mean I make money?
Not on its own. A deduction reduces your taxable income; it does not refund the whole loss. The property still needs to perform for the overall position to work.
Can the rules change?
Yes. Tax settings are set by government and reviewed from time to time. Check current ATO guidance or speak with a registered tax agent about the 2026–27 settings before you rely on anything.
Related: usable equity calculator and your first investment property.
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