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    Tax answer

    What is negative gearing in Australia?

    Short answer: Negative gearing is when the annual costs of owning an investment property (interest, agent fees, rates, depreciation, etc.) exceed the rental income it produces. In Australia, the resulting loss can be deducted against your other taxable income — including salary — reducing the tax you pay overall. It's legal, widely used (~1.3 million Australians), and taxed under s. 51 of the Income Tax Assessment Act. The tax benefit depends on your marginal tax rate: a $10,000 loss saves ~$3,900 in tax at the 39% bracket.

    Worked example

    Property: $700,000 unit in Brisbane. Loan: $560,000 at 6.2%.

    Rental income (52 weeks @ $600)$31,200
    Interest on loan−$34,720
    Property management (8%)−$2,496
    Council rates + water−$3,400
    Insurance−$1,800
    Repairs + maintenance−$1,500
    Body corporate−$3,200
    Depreciation (Div 40 + 43)−$8,000
    Rental loss−$23,916

    At a 39% marginal tax rate, this loss reduces tax by ~$9,327. The out-of-pocket cost drops from $23,916 to $14,589 per year — the difference is what negative gearing subsidises. Model your own property in the negative gearing calculator using the 2025-26 ATO brackets.

    Whether it's worth it

    Negative gearing is only good economics if capital growth outpaces the after-tax income loss. Rule of thumb: for a $700k property with a $15k after-tax loss/year, you need >2.1% annual capital growth just to break even, plus growth to actually make money.

    What's not deductible

    • Loan principal repayments (only interest is deductible)
    • Improvements (added to cost base for CGT, or depreciated at 2.5% under Division 43)
    • Second-hand plant and equipment on properties acquired after 9 May 2017 (Division 40 restriction)
    • Expenses incurred while the property is not genuinely available for rent

    Track your gearing position

    Run your own numbers in the free negative gearing calculator — it uses the 2025-26 ATO brackets and full Division 40 + 43 depreciation. PropAlly's Cashflow and Investor modules then calculate your live gearing position by property and portfolio-wide, and generate an EOFY pack aligned to the ATO rental schedule.

    Related reading

    This is general information, not tax advice. Confirm your specific position with a registered tax agent.

    Frequently asked questions

    Is negative gearing the same as making a loss?▾

    Yes — but a loss you can deduct. The property is 'negatively geared' when expenses exceed income. Whether that's a good investment depends on capital growth: you're accepting an income loss now in exchange for expected capital gain later.

    Do I need to sell the property to benefit?▾

    No. The tax deduction is annual — you claim the loss every year it exists. Capital gains only come when you sell (and are then taxed at 50% discount if you've held the property 12+ months, currently — the 2026 policy debate may change this).

    Is negative gearing being abolished in 2026?▾

    There's an active federal proposal to grandfather existing arrangements and limit new negative gearing to newly-built properties only. Nothing has passed as of July 2026. If it passes, existing investors retain benefits and new investors must buy new-build to negatively gear.

    What counts as a deductible expense?▾

    Interest on the investment loan, property management fees, council rates, land tax, insurance, repairs (not improvements), depreciation (Division 40 + Division 43 at 2.5%), pest control, body corporate fees, and travel to inspect the property (limited).

    Can I negatively gear my primary residence?▾

    No — only investment properties. A primary residence has no rental income to offset expenses against.

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