What is negative gearing?

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A guide to negative gearing

Updated March 13, 2024
Written by James Hurwood
Reviewed by Stephen Zeller

Expert tips for utilising negative gearing

Negative gearing can be a real boon for property investors in Australia, but it’s not without its risks. Our General Manager of Money, Stephen Zeller has a few tips for anyone thinking of utilising negative gearing:

Stephen Zeller
General Manager – Money

Seek professional advice

Being in a negatively geared position can be a daunting prospect for a first-time investor, but it’s extremely common, especially in a period when interest rates are quite high. When considering purchasing an investment property and potentially being in a negatively geared position, it’s best to discuss with your financial planner or accountant about what this may mean for your day-to-day cash flow and your expected return.

Do your own maths and research

Although we ask for advice from our accountant/financial planner when reviewing negative gearing, take the time to understand the advice being given by the professionals and crunch the numbers yourself. By knowing the math, this can give you an idea of what properties to consider purchasing as an investment in the future.

Keep capital growth in mind

When purchasing a property, as well as considering negative gearing, you should also think about capital growth. Although the rental income for one property might not be as high for another property, the property receiving less income and being more negatively geared may end up being worth more in the future compared to the property which was closer to being positively geared in the first place. This is a common scenario when looking at an apartment versus a standalone home, where the home has potential to renovate and improve the value in the future.

Gearing explained

What is gearing?

What is neutral gearing?

What is positive gearing?

What is negative gearing vs positive gearing?

Negative gearing and how it works

How does negative gearing work?

How does claiming negative gearing work in Australia?

Which property expenses am I allowed to claim as tax deductions?

What are the potential pros and cons of negative gearing?

Meet our home loans expert, Stephen Zeller

Stephen Zeller
General Manager – Money

Stephen has more than 30 years of experience in the financial services industry and holds a Certificate IV in Finance and Mortgage Broking. He’s also a member of both the Australian and New Zealand Institute of Insurance and Finance (ANZIIF) and the Mortgage and Finance Association of Australia (MFAA).

Stephen leads our team of Home Loan Specialists, and reviews and contributes to Compare the Market’s banking-relating content to ensure it’s as helpful and empowering as possible for our readers.

¹Australian Taxation Office. Rental expenses to claim. Accessed June 2023.

²Australian Taxation Office. How to claim a tax loss. Accessed June 2023.

³Australian Taxation Office. Rental expenses you can claim now. Accessed June 2023.

⁴Australian Taxation Office. Rental expenses you claim over several years. Accessed June 2023.

⁵Australian Taxation Office. Rental expenses you can’t claim. Accessed June 2023.