If you’re exploring property investment strategy in Australia, chances are you’ve come across the term negative gearing. It’s one of those financial concepts that can sound more complicated than it really is but understanding it could help you reduce your tax and grow your wealth strategically.
So, how does negative gearing work, and is it still worth it in 2025? Let’s break it down clearly, especially for first-time or early-stage investors.
What Is Negative Gearing?
Negative gearing occurs when the income you earn from an investment property (usually rent) is less than the expenses of owning it such as interest on your home loan, maintenance costs, insurance, and more.
In short: you’re making a loss at least on paper.
But here’s the catch that loss can be claimed as a deduction on your taxable income, reducing the amount of tax you pay.
Example:
- Rental income: $25,000/year
- Expenses (loan interest, rates, maintenance): $30,000/year
- Loss: $5,000 → This $5,000 can be used to offset your taxable income.
How Does Negative Gearing Work in Australia?
In Australia, negative gearing has long been a tax strategy used by property investors. Here’s how it works in action:
1. You purchase an investment property using a loan.
2. Your rental income does not cover all the associated expenses.
3. You report this annual loss to the ATO.
4. The loss is deducted from your overall taxable income.
5. This can potentially place you in a lower tax bracket or reduce your tax bill significantly.
In 2025, negative gearing rules remain unchanged as of now, investors can still claim full deductions on eligible expenses tied to negatively geared properties.
Check the official ATO page for updates
Calculating Negative Gearing: What Counts?
To calculate whether you’re negatively geared, consider the following:
| Expense Category | Typical Inclusions |
| Loan Interest | Only the interest portion, not principal |
| Council & Water Rates | Recurring local government costs |
| Insurance | Building & landlord insurance |
| Maintenance & Repairs | Only non-capital improvements |
| Property Management Fees | Agent commission, advertising, admin costs |
| Depreciation | On fittings, fixtures, and construction costs |
Calculation Formula:
Net Rental Position = Rental Income – Deductible Expenses
If the result is negative → you are negatively geared.
Is Negative Gearing Worth It in 2025?
That depends on your investment goals, risk appetite, and financial position.
Pros
- Reduces your tax bill
- Allows you to invest in high-growth areas
- Enables long-term wealth accumulation via capital gains
Cons
- You’re running at a loss upfront
- Can strain cash flow
- Capital growth is not guaranteed
In 2025, with interest rates stabilising post-COVID and rental demand surging in some metro and regional areas, negative gearing is still considered a viable strategy but it’s not one-size-fits-all.
Click here to Speak to a qualified mortgage broker or financial advisor before making a decision especially if this is your first investment property. At Credit Hub, we can help you assess whether negative gearing suits your financial strategy.
Who Typically Uses Negative Gearing?
- High-income earners looking for tax offsets
- Long-term investors banking on future capital growth
- Professionals and couples planning property portfolios
If you’re unsure whether you’re in the right position to leverage this strategy, our Credit Hub team can help you evaluate your options based on your income, investment horizon, and cash flow goals.
Does Negative Gearing Apply to Other Assets?
Yes! While it’s commonly associated with property, negative gearing also applies to other income-generating assets like:
- Shares and ETFs
- Managed funds
- Business ventures
However, the same rule applies you must be borrowing to invest, and the investment must generate assessable income.
Final Word from Credit Hub:
At Credit Hub Australia, we help everyday Australians make smarter financial decisions whether it’s choosing the right home loan, evaluating an investment, or understanding strategies like negative gearing.
Looking to explore property investment or restructure your existing portfolio?
Book a free consultation with one of our brokers today we’ll help you make the numbers work for you.
Frequently Asked Questions (FAQs):
- What is negative gearing in Australia?
Negative gearing is when your investment costs (like interest and maintenance) are higher than your rental income, allowing you to claim the difference as a tax deduction. - How does negative gearing work for property investors?
It allows investors to offset their losses against other income, reducing their annual tax payable while they wait for property value to grow over time. - Is negative gearing still allowed in Australia in 2025?
Yes. As of now, there have been no legislative changes removing or restricting negative gearing benefits. - How do I calculate negative gearing?
Subtract all allowable expenses (like interest, rates, insurance) from your rental income. If it’s a negative number, you are negatively geared. - Is negative gearing worth it?
It can be especially for high-income earners and long-term investors but it requires careful planning. A mortgage broker can help determine if it’s right for you.
Disclaimer:
The information provided by Credit Hub and its affiliates is for general informational purposes only. While we strive for accuracy, readers should verify any details before making financial decisions. Credit Hub accepts no liability for errors, omissions, or actions taken based on this content.