Negative Gearing Explained: How It Works for Australian Property Investors
Understand how negative gearing works, when it makes sense, and how to track it with BrickTrack.
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.
What Is Negative Gearing?
Negative gearing happens when owning an investment property costs more than it earns. Today, that loss can be offset against your other income, salary included, which lowers your overall tax bill.
Say your rental property brings in $25,000 a year in rent but costs $32,000 in mortgage interest, management fees, repairs and depreciation. That's a $7,000 loss, and it comes straight off your taxable income.
How Negative Gearing Reduces Your Tax
A $7,000 loss saves you $2,590 in tax at a 37% marginal rate. Your real out-of-pocket cost of holding the property is the loss minus that tax benefit, not the loss on its own.
| 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?
It's not a strategy you choose so much as a side effect of holding a property that costs more than it earns. It makes sense when the capital growth potential justifies the holding cost, when your marginal tax rate is high enough that the benefit is actually meaningful, and when you expect the property to turn positively geared eventually as rents catch up.
What doesn't make sense is losing money on purpose to chase the deduction. The tax benefit only ever covers part of the loss, never all of it.
Tracking Negative Gearing with BrickTrack
BrickTrack works out your net rental position for you:
- Import transactions from a CSV or Excel export to capture all income and expenses
- Categorise expenses using suggested ATO categories
- View tax position on the dashboard: see your 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 in real time. No surprises when tax time actually arrives.
The Bottom Line
Negative gearing is a tool, not a goal. Buy for the fundamentals, location, demand, room to grow, and let BrickTrack keep the expenses organised and the tax position clear underneath it.