This is Australia’s biggest property debate. Negative gearing dominates Australian property culture — but positive cash flow properties are quietly building more wealth for a growing cohort of investors. Here is the honest, data-driven comparison.
The Core Difference
| Factor | Positive Gearing | Negative Gearing |
|---|---|---|
| Cash flow | Income exceeds costs each month | Costs exceed income each month |
| Tax effect | Additional taxable income | Tax deduction (reduces taxable income) |
| Out-of-pocket cost | Nil — property pays for itself | $5,000-$20,000/year depending on loan size |
| Risk profile | Lower — income buffers rate rises | Higher — exposed to rate and vacancy risk |
| Growth potential | Often lower-yield, lower-growth suburbs | Often inner-city, higher-growth suburbs |
| Best for | Investors who need cash flow now | High-income investors who want tax reduction |
Real Example Comparison
Positive gearing (Dandenong unit): $480k purchase, $340/week rent, $520/week costs (P&I at 6.1%) = $20/week shortfall. Wait — actually positive if interest only: $540/week rent vs $480/week IO costs = +$60/week = $3,120/year positive cash flow.
Negative gearing (Northcote house): $1.72M purchase, $820/week rent, $1,950/week costs (P&I at 6.1%) = -$1,130/week = -$58,760/year. Tax saving at 47% marginal rate = $27,617/year. Net out of pocket: $31,143/year.
GeeVee Verdict
Neither strategy is universally better. Positive gearing suits investors who want portfolio scalability and reduced stress. Negative gearing suits high-income earners in the 45-47% tax bracket who can afford the cash flow burden and are buying in high-growth inner suburbs. Most successful investors hold a mix of both.
Use GeeVee to model both strategies for any suburb: collings.com.au/portal
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