The Basics of Negative Gearing: What You Need to Know
Negative gearing is a term that comes up a lot when people start talking about property investment — but it’s often explained in a way that makes it feel more complicated than it really is.
At its core, negative gearing is simply about how the costs of an investment property compare to the income it produces. Understanding the basics can help you decide whether it’s something worth exploring, or something to approach with caution.
Let’s break it down in straightforward terms.
What Does “Negative Gearing” Actually Mean?
Negative gearing happens when an investment property costs you more to hold than it earns in rental income.
In other words, the rent you receive doesn’t fully cover expenses such as loan interest, council rates, insurance, property management fees, maintenance, and other ongoing costs.
When expenses are higher than income, the property is said to be negatively geared.
Why Is Negative Gearing Talked About So Much?
Negative gearing is commonly discussed because the loss you make on the property may be tax-deductible.
If you earn income from other sources (such as a salary), that property loss may be able to be offset against your income, potentially reducing the amount of tax you pay.
This tax treatment is why negative gearing is often seen as a strategy — even though it starts with a loss.
Making a Loss Isn’t the Goal
One important thing to understand early is that negative gearing itself isn’t the objective.
The goal for most investors is long-term capital growth — owning an asset that increases in value over time.
Negative gearing is simply the short-term cash flow position that may occur while holding the property, particularly in the early years of an investment.
How Cash Flow Fits Into the Picture
Even with tax benefits, negative gearing still means you’re contributing money each month to hold the property.
That’s why cash flow matters. You need to be comfortable covering the gap between rental income and expenses without putting pressure on your day-to-day finances.
A negatively geared property should feel manageable, not stressful.
Negative Gearing Isn’t the Same for Everyone
Negative gearing doesn’t affect everyone in the same way.
Your income level, tax position, loan structure, and interest rate all influence how beneficial — or costly — negative gearing may be.
What works well for one investor may not be suitable for another.
Loan Structure Matters
How an investment loan is structured plays a big role in negative gearing.
Interest rates, whether the loan is interest-only or principal and interest, and how offset accounts are used can all affect cash flow and outcomes.
This is why understanding the finance side is just as important as understanding the tax side.
Negative Gearing Works Best as Part of a Plan
Negative gearing is most effective when it fits into a broader financial strategy.
That includes understanding how long you plan to hold the property, what your long-term goals are, and how the investment fits alongside other financial commitments.
Tax professionals such as
The Accountants
can help explain how negative gearing works from a tax perspective and how it fits into your overall position.
Understanding the Basics Before You Invest
Many people jump into property investment without fully understanding what negative gearing means for their cash flow and finances.
Taking the time to understand the basics helps you make decisions with clarity — rather than relying on assumptions or headlines.
How Chase Helps With the Finance Side
While negative gearing is a tax concept, the way your loan is set up can significantly affect how it plays out in practice.
Chase Douglas has extensive experience in mortgage lending and helps clients understand how investment loan structures, interest rates, and cash flow interact with strategies like negative gearing.
Chase works alongside your broader advisory team to ensure the finance structure supports your investment goals — rather than complicating them.
Is Negative Gearing Something You Should Explore?
Negative gearing isn’t automatically good or bad — it’s simply one of many tools available to investors.
The key is understanding how it works before you commit.
👉 Book a conversation with Chase Douglas to understand how the finance side of property investment works and whether a strategy like negative gearing could suit your situation.
Getting the basics right is always the best place to start.
