Question 1

What is negative gearing?

Accepted Answer

Negative gearing occurs when your investment property expenses (loan interest, rates, insurance, management, maintenance, depreciation) exceed the rental income. The resulting loss can be deducted from your other taxable income, reducing your overall tax bill.

Question 2

How does the tax benefit work?

Accepted Answer

The net rental loss is deducted from your total taxable income. The actual tax saving equals the loss multiplied by your marginal tax rate. For example, a $10,000 loss at a 37% marginal rate saves $3,700 in tax.

Question 3

What is depreciation and why does it matter?

Accepted Answer

Depreciation is a non-cash deduction for the wear and tear on the building structure (Division 43) and fixtures/fittings (Division 40). It reduces your taxable income without costing you any money, making it a powerful component of negative gearing. A quantity surveyor can prepare a depreciation schedule.

Question 4

Is negative gearing only available in Australia?

Accepted Answer

Australia is one of the few countries that allows investment property losses to be offset against all other income without restriction. Many countries limit such deductions to investment income only. This makes negative gearing a uniquely powerful strategy for Australian investors.

Question 5

What is the difference between cash flow and net rental position?

Accepted Answer

Cash flow measures actual money in and out — it excludes depreciation since no cash is spent. Net rental position includes depreciation as a deductible expense, which is what the ATO uses to determine your tax deduction. You can be cash-flow negative but have an even larger tax deduction thanks to depreciation.

Question 6

Should I aim for negative or positive gearing?

Accepted Answer

Neither is inherently better. Negative gearing provides tax benefits and is common when interest rates are high or rents are low relative to property value. Positive gearing means the property pays for itself. The right strategy depends on your income, tax bracket, investment timeline, and capital growth expectations.

Negative Gearing Calculator (2026)

Input Values

Rental Income

Loan

Expenses

Tax

Results

Income vs Expenses Breakdown

Frequently Asked Questions

What is negative gearing?

How does the tax benefit work?

What is depreciation and why does it matter?

Is negative gearing only available in Australia?

What is the difference between cash flow and net rental position?

Should I aim for negative or positive gearing?

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