Blog

Negative Gearing Explained

May 15, 2025

Negative Gearing Explained Australia: What Investors Need to Know

Negative gearing explained Australia – it’s a phrase you might have heard but what does it really mean, and how does it affect you as an investor?

What is Negative Gearing?

Negative gearing happens when the cost of owning a property (e.g. loan interest, maintenance, insurance) is more than the rental income you earn from it.

Example:

• Rental income = $2,800/month
• Property expenses = $3,200/month
• Result = You’re negatively geared by $400/month

This loss can be claimed against your salary or other income—helping you reduce your taxable income. This is why negative gearing explained Australia is important for investors.

Why Do People Use Negative Gearing?

While over 1 million properties in Australia are negatively geared, investors still use this strategy for two main reasons:

1. Tax savings from deducting losses
2. Potential capital growth from the property increasing in value

If the property rises in value over time, the gain may outweigh the short-term losses.

What is Capital Gains Tax (CGT)?

Capital Gains Tax is the tax you pay when you sell an investment property for a profit.

If you’ve owned the property for 12 months or more, you may be eligible for a 50% CGT discount. This tax is included in your income tax return and is not a separate tax

Ready to Invest in Property?

Before you buy an investment property, it’s important to speak with a tax adviser or financial planner to understand what’s best for your financial situation.

Need help with your investment finance? Call us at Connected Finance on 02 4288 8100 or email admin@connected-finance.com.au. We’ll help you explore the best investment loan options.