Negative Gearing Australia 2026: How It Works, Tax Benefits and Risks
Updated April 2026 · 10 min read
Negative Gearing: Australia Unique Tax Strategy
Australia is one of the few countries that allows investors to deduct property investment losses against their salary income. Over 2.2 million Australians own investment properties, and the majority use negative gearing to reduce their tax bills. But negative gearing is a tool, not a guaranteed path to wealth — you are deliberately losing money each year betting on capital growth to make it worthwhile. Use our mortgage calculator (switch to AUD) to model your investment property costs.
The Real Numbers Behind Negative Gearing
On a AUD 750,000 investment property with AUD 600,000 mortgage at 6 percent: annual interest is AUD 36,000. Add rates, insurance, management, and maintenance: total costs approximately AUD 48,000. Rental income at 4 percent yield: AUD 30,000. Annual loss: AUD 18,000. At 37 percent marginal rate, the tax saving is AUD 6,660. You still lose AUD 11,340 per year in cash. The property must grow by at least 2 to 3 percent annually just to break even.
Get a depreciation schedule from a qualified quantity surveyor — it costs AUD 600 to 800 and typically finds AUD 5,000 to 10,000 in additional annual deductions. Use our investment calculator and tax calculator to model the full investment property scenario including rental income, expenses, tax benefits, and capital growth projections.
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Frequently Asked Questions
What is negative gearing?
Negative gearing means your investment property expenses (mortgage interest, maintenance, insurance, property management) exceed the rental income. The loss reduces your taxable income from other sources like salary. At 37 percent marginal rate, a AUD 10,000 annual loss saves AUD 3,700 in tax.
Is negative gearing worth it?
Only if the property appreciates in value enough to offset the annual losses plus selling costs. Negative gearing saves tax but you are still losing money each year. The strategy relies on capital growth to deliver overall profit when you eventually sell.
What can I claim as property investment deductions?
Mortgage interest, council rates, water rates, property management fees, insurance, repairs and maintenance, depreciation (building and fixtures), travel to inspect property, legal and accounting fees related to the property, and landlord insurance.
How does depreciation work for investment properties?
Building depreciation: 2.5 percent of construction cost per year for 40 years (properties built after 1985). Fixtures depreciation (carpet, blinds, appliances): varies by asset life. A depreciation schedule from a quantity surveyor typically finds AUD 5,000 to 10,000 in annual claims.
What is the 50 percent CGT discount?
If you hold an investment property for more than 12 months, only 50 percent of the capital gain is taxed when you sell. On a AUD 200,000 profit at 37 percent marginal rate: tax is AUD 37,000 (versus AUD 74,000 without the discount).