Negative gearing explained for investors
How negative gearing works for Australian property investors, when running a rental at a loss makes sense, and how to track the numbers properly.
Update, August 2026: this describes negative gearing as it works today. From the 2027-28 income year, a residential property acquired on or after 7:30pm (ACT legal time) on 12 May 2026 is treated differently. See our 2027 reform guide for what changes and when. To check a specific property against the cutoff, use our negative gearing cutoff calculator.
What is negative gearing?
Negative gearing is when an investment property costs more than it earns. Today you can offset that loss against your other income, salary included, which lowers your tax bill.
Say a rental brings in $25,000 a year but costs $32,000 in mortgage interest, management fees, repairs and depreciation. The $7,000 loss comes off your taxable income.
How negative gearing reduces your tax
A $7,000 loss saves $2,590 in tax at a 37% marginal rate. Your real cost of holding the property is the loss minus that tax benefit.
| Item | Amount |
|---|---|
| Rental income | $25,000 |
| Total expenses | $32,000 |
| Net loss | -$7,000 |
| Tax benefit (at 37%) | $2,590 |
| True cost of holding | $4,410 |
Common deductible expenses
The ATO allows deductions for expenses directly related to earning rental income:
- Mortgage interest: the largest deduction for most investors
- Property management fees: typically 5-8% of rent
- Council rates and water: ongoing holding costs
- Insurance: landlord and building insurance
- Repairs and maintenance: fixing existing items (not improvements)
- Depreciation: Division 40 (plant & equipment) and Division 43 (building)
- Strata/body corporate fees: for apartments and townhouses
When does negative gearing make sense?
Negative gearing is a side effect of holding a property that costs more than it earns. It can make sense when the expected capital growth justifies the holding cost, when your marginal tax rate is high enough for the benefit to matter, and when you expect rents to catch up and turn the property positively geared.
Losing money on purpose to chase the deduction doesn't make sense. The tax benefit only ever covers part of the loss.
Tracking negative gearing with BrickTrack
BrickTrack works out your net rental position:
- Import transactions from a CSV or Excel export to capture all income and expenses
- Categorise expenses using suggested ATO categories
- View your tax position on the dashboard, with net rental income or loss per property
- Export to MyTax: Item 21 (Net rent) is pre-filled with your figures
The Tax Position card shows whether each property is positively or negatively geared as you go, so tax time holds no surprises.
Buy for the fundamentals
Buy for location, demand and room to grow, and let the deduction follow. BrickTrack keeps the expenses organised and the tax position clear underneath.