"Gearing" just means borrowing to invest. Whether a property is positively or negatively geared depends on whether the rent covers your costs. It has a big effect on your cash flow and tax.
Negative gearing
A property is negatively geared when costs exceed rent. Costs include loan interest, property management, insurance, rates, strata, repairs and depreciation.
Example: - Rent: $28,000 a year - Interest and costs: $40,000 a year - Loss: $12,000
Under the rules that have applied for decades, that $12,000 loss could be deducted from your other income, like salary, reducing your tax. At a 37% marginal rate plus Medicare, that's a tax saving of around $4,700, so the real cost is about $7,300.
Investors accept the loss because they expect capital growth to more than make up for it.
Positive gearing
A property is positively geared when rent exceeds costs. You make a profit, which is taxed as income.
Positively geared properties help your cash flow and serviceability, but they're often in areas with lower growth.
Neutral gearing
Rent roughly covers costs. You don't make or lose money in the short term.
The 2027 changes
From 1 July 2027:
- Negative gearing is limited to new builds for properties bought after 7:30pm AEST, 12 May 2026
- Properties owned before then are grandfathered
- The 50% CGT discount is replaced with indexation and a 30% minimum tax for gains accruing after 1 July 2027
So if you buy an established property today that runs at a loss, from 1 July 2027 you generally won't be able to deduct that loss against your salary in the same way. Your accountant can explain how losses are treated under the new rules.
What this means in practice
- Cash flow matters more for new purchases of established properties
- Positive or neutral gearing strategies become relatively more attractive
- New builds keep negative gearing, which may increase demand for them
- Existing investors keep current negative gearing benefits on grandfathered properties
Interest rates and gearing
In 2026, four rate rises pushed many properties from neutral to negative. On a $520,000 investment loan, a 1.00% rise adds about $5,200 a year in interest. Review your cash flow and consider whether a lower rate or a different structure would help.
Frequently asked questions
Is negative gearing a good strategy?
Only if the long-term growth outweighs the ongoing losses. It's never good to lose money just for a tax deduction.
Do I lose negative gearing if I refinance?
Refinancing a grandfathered property's loan shouldn't in itself change its status, but check with your accountant before restructuring.
Can depreciation make a property negatively geared?
Yes. Depreciation is a non-cash deduction, so a property can be cash-flow positive but still show a tax loss.
Want to see how gearing affects your investment numbers? Call Finfident on 0424 545 654. We'll work alongside your accountant.
This article is general information only and doesn't take into account your objectives, financial situation or needs. Figures, rates and scheme rules are current as at October 2026 and can change. Finfident Finance Brokers (ABN 94 679 280 801) is Credit Representative 569374 of Outsource Financial Pty Ltd (ACN 131 090 705), Australian Credit Licence 384324.