What Is Negative Gearing—and Should Investors Still Rely on It?

You’ve probably heard the term negative gearing mentioned a lot when it comes to investment properties in Australia. But what does it actually mean, and is it still a smart move in 2025?

So, what is negative gearing?

Negative gearing is when the cost of owning your investment property ends up being more than the income you receive from rent. This might include your mortgage interest, council rates, insurance, maintenance and other holding costs.

When your expenses are higher than your rental income, the property is running at a loss. The benefit for investors is that this loss can be claimed against other income when doing your tax return, which usually means a lower tax bill.

For example, if your property earns $25,000 in rent, but your total expenses come to $35,000, that $10,000 difference can be deducted from your salary income when lodging your tax return.

Why investors choose to do it

Negative gearing has been a common strategy in Australia for years. A lot of investors are happy to run a property at a loss in the short term, with the hope that the value of the property will increase enough over time to make up for it.

It also helps that the tax system currently allows investors to reduce their taxable income, which means they get some money back each year. It’s not just high-income earners using this strategy either. Many everyday Australians have used negative gearing to build a property portfolio.

What’s changing?

In the past financial year, property investors claimed almost $11 billion in losses through negative gearing. That figure is expected to climb to over $12 billion next year. With numbers like that, it’s no surprise that negative gearing has become a talking point for tax reform.

Some people believe it gives investors an unfair advantage over first-home buyers and pushes up property prices. Others argue it does very little to improve housing supply or affordability.

There’s been talk of changing the rules for years, but so far nothing major has happened. Still, it’s something investors should keep an eye on.

Is negative gearing still worth it?

With the cost of owning a property increasing and rental returns not always keeping pace, negative gearing might not be as effective as it once was. If you’re relying heavily on the tax benefits to make your investment work, it could be worth having a closer look at whether the numbers still stack up.

Make sure you’re claiming everything you’re entitled to. Many investors miss out on legitimate deductions, especially when it comes to depreciation, which can make a big difference.

What to consider

Are you confident your property is performing as well as it could be? Is the rent keeping up with the market? Would a positively geared or even neutrally geared property give you more financial freedom?

At Resident Property, I help investors work through these questions so they can make informed decisions. It’s not just about saving on tax. It’s about setting yourself up for long-term success.

Final thoughts

Negative gearing can still be a useful strategy, but it’s not the right fit for everyone. It’s a tool, not a plan. Like any part of your investment strategy, it should be reviewed regularly to make sure it’s still working for you.

If you’d like to have a chat about how your investment is performing or get a second opinion, I’m always happy to help. No pressure, just honest advice.