Negative gearing is one of the most discussed and misunderstood concepts in Australian property investment. This guide explains exactly how it works, what you can claim, and whether a negatively geared property actually benefits you financially.
What Is Negative Gearing?
A property is negatively geared when the costs of owning it (mortgage interest, rates, insurance, maintenance, property management fees) exceed the rental income it generates. The resulting loss can be offset against your other taxable income, reducing the total tax you pay to the ATO.
A Simple Negative Gearing Example
| Item | Annual Amount |
|---|---|
| Rental income | $28,600 ($550/week) |
| Mortgage interest | $38,400 |
| Rates, insurance, maintenance | $4,200 |
| Property management (8%) | $2,288 |
| Total costs | $44,888 |
| Net rental loss (tax deduction) | -$16,288 |
| Tax saving at 37% marginal rate | $6,027 |
| Actual after-tax shortfall | $10,261 per year ($197/week) |
What Can You Claim as a Tax Deduction on an Investment Property?
- Mortgage interest (not principal repayments)
- Council rates and water rates
- Landlord insurance
- Property management fees
- Repairs and maintenance (not capital improvements)
- Depreciation on the building and fixtures (quantity surveyor report required)
- Advertising costs to find tenants
- Accounting and tax agent fees
- Travel costs related to inspecting the property (limited conditions)
Is Negative Gearing a Good Strategy in 2026?
Negative gearing only makes sense if the property is growing in capital value fast enough to outweigh the ongoing shortfall. In low-growth markets, a negatively geared property can destroy wealth rather than build it. In high-growth markets like Melbourne’s inner-north, where median values have grown at 5.8% per annum over 10 years (CoreLogic), the equation can work strongly in an investor’s favour.
GeeVee Verdict
Negative gearing is a tax strategy, not an investment strategy. Buy the best growth property you can afford, not the property that gives you the biggest tax deduction. The property should stand on its own merits: strong location, rental demand, and a 10-year growth track record. The tax deduction is a bonus, not the reason to buy.
Frequently Asked Questions
Can negative gearing make a property profitable?
In isolation, no. The tax saving reduces the shortfall but does not eliminate it. The profit comes from capital growth when you eventually sell the property.
What is the difference between negative and positive gearing?
A positively geared property generates more rental income than it costs to own. This creates taxable income but does not require you to cover a shortfall from your salary. Many investors target positive cash flow in regional areas or high-yield suburbs.
Is negative gearing being abolished?
As of June 2026, negative gearing remains available in Australia with no confirmed legislative changes. Any future policy changes would typically be prospective only, protecting existing investments.
Whether you’re buying your first investment property, building a portfolio, or exploring SMSF property investment, the Collings Property Platform gives you access to off-market opportunities, portfolio tracking, investment tools, and property insights powered by GeeVee AI. Join free today and start building your property future. collings.com.au/portal
Find your next property with Collings
Track suburbs, get matched to on-market and off-market listings, and manage your whole property search in one place. Access the Collings property portal.
