Invest
Fast facts about negative gearing
What is negative gearing?
Gearing is when investors borrow money to purchase an investment. When investors buy a loss-making investment, it’s called negative gearing.
Fast facts about negative gearing
What is negative gearing?
Gearing is when investors borrow money to purchase an investment. When investors buy a loss-making investment, it’s called negative gearing.
What is a negatively geared property investment?
Gearing may be used to buy any investment asset, but it is more commonly employed by property investors.
A negatively geared investment property means that the sum of expenses (including loan interest and principal payments) is higher than the rent income generated.
Investors need to use their own income to pay for the remainder of expenses.
Benefits of negative gearing
The Australian Taxation Office (ATO) allows negatively geared investors to offset the loss against their tax payable.
This tax offset and the hope that the asset will increase in value enough to recover losses when liquidated is what negative gearers are after.
Negative gearing and regulations
Because many property investors use the negative gearing strategy to minimise their tax payable, there have been several propositions to reform its regulations and impose tighter restrictions.
As at 1 July 2017, ATO enforced tighter restrictions on:
- Depreciation deductions claims for plant and equipment items in residential and rental real estate
- Offsets for travel expenses incurred for any transaction relating to the property
Despite this, the Australian Labor Party (ALP) proposed even tighter restrictions on negative gearing in the lead up to the 2019 elections.
Proposed changes to negative gearing
The government has kept an eye on negative gearers to ensure that the tax privileges they are given are not taken advantage of. In fact, the Opposition has been vocal about enforcing tighter restrictions should the party win elections.
ALP’s most recent attempt to tighten negative gearing rules were proposed in the run up to the May 2019 elections:
- Negative gearing strategy may only be applied to newly constructed properties
- Only negatively geared properties purchased before 1 January 2020 will be fully grandfathered
ALP’s election loss halted further restrictions on this strategy, but it may not be the last time restrictions will be proposed or enforced.
If you’re a rookie property investor who wants to use the negative gearing strategy, it’s highly recommended to seek the advice of a licensed professional before securing a property.
RELATED ARTICLES
About the author
About the author
Property
Australia’s rental squeeze is now a business problem: inflation, capacity and the new growth calculus
Record-low rental vacancies are no longer just a social headline – they’re reshaping cost structures, wage dynamics and capital allocation across corporate Australia. With economists warning of a ...Read more
Property
Rents Are Repricing Australia Inc: What record‑low vacancies mean for inflation, talent and strategy
Australia’s rental market has slipped into a vacancy desert, and it’s not just tenants feeling the heat. Persistently tight supply is pushing up rents, embedding services inflation and complicating ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
Property
Australia’s rental squeeze is now a business problem: inflation, capacity and the new growth calculus
Record-low rental vacancies are no longer just a social headline – they’re reshaping cost structures, wage dynamics and capital allocation across corporate Australia. With economists warning of a ...Read more
Property
Rents Are Repricing Australia Inc: What record‑low vacancies mean for inflation, talent and strategy
Australia’s rental market has slipped into a vacancy desert, and it’s not just tenants feeling the heat. Persistently tight supply is pushing up rents, embedding services inflation and complicating ...Read more
Property
Young buyers poised for a comeback as 5% First Home Guarantee takes effect
In a move set to reshape the Australian property landscape, the government’s revamped First Home Guarantee is poised to open the doors of homeownership to a new generation of young AustraliansRead more
Property
AFG Securities waives settlement fees for first-home buyers, signalling strategic shift
In a strategic move aimed at easing the financial burden on first-home buyers, AFG Securities has announced the elimination of settlement fees on select loans, potentially saving customers up to $699Read more
Property
From trust woes to wealth: Australian agencies' secret to boosting prices
In Australia’s residential market, trust is no longer a nice-to-have—it’s a pricing variable. Persistent distrust of real estate agents is depressing vendor outcomes and inviting regulatory heat, but ...Read more
Property
Reality check for first home buyers: Affordable suburbs with 5% deposit
In a significant development for Australian first home buyers, a new property search tool from Aussie Home Loans is set to transform the way prospective homeowners approach the market. As the Federal ...Read more
Property
Trust as a performance multiplier in Australia's real estate market
In Australia’s A$10–11 trillion housing market, trust is emerging as a crucial factor that sellers and agencies can no longer afford to overlook. Traditionally viewed as a soft metric, trust is now ...Read more
Property
LJ Hooker Lake Macquarie makes a splash with Belmont buy as real estate consolidation looms
LJ Hooker Lake Macquarie’s acquisition of the Belmont office, including its rent roll, is less about shopfronts and more about balance‑sheet resilience. In a market where listings ebb and flow with ...Read more
