Negative gearing is a description, not a special tax scheme. If the deductible costs of holding an investment, usually a rental property, are higher than the income it produces in a year, the investment is negatively geared. Under the current rules, that net rental loss can generally be deducted against your other taxable income, including salary.

The property can still be a poor or a sound investment. The tax deduction only reduces the tax on a genuine loss. You still have to fund the cash shortfall, and a later capital gain is taxable, subject to the CGT rules and any main residence exemption that does not apply to a typical investment property.

This pillar explains the current law: what counts as a deductible expense, how the tax saving is worked out, and the records you need. The Never Lose Interest negative gearing calculator explainer shows the arithmetic, including the 2027 quarantine. The 2027 policy itself is covered in the guides to the 2027 changes, grandfathering and new builds versus established property. Until 30 June 2027, the current rules continue to apply, including for established properties bought after Budget night.

This is general information only. It is not personal advice or a tax assessment, and it does not take into account your objectives, financial situation or needs.

What does negatively geared mean?

An investment is:

  • negatively geared, if deductible expenses exceed assessable income from the investment in that year
  • neutrally geared, if they roughly match
  • positively geared, if income exceeds deductible expenses, so there is a taxable profit

For a rental property, assessable income is usually rent, plus any other amounts you receive for the property, such as a letting fee recouped from a tenant. Deductible expenses can include interest on a loan used to earn that rent, council and water rates, insurance, agent's fees, advertising for tenants, and repairs. Some costs are capital and are claimed over time, or added to the cost base, rather than deducted in full in the year you pay them.

If the property is jointly owned, you generally include your share of the rent and your share of the expenses, in line with your legal interest, unless a different arrangement is genuinely in place and can be supported.

A paper loss and a cash shortfall are related, but they are not always the same number. Capital works deductions and depreciation can increase the tax loss without a matching cash outgoing in that year. Loan principal repayments are a cash outgoing that are not deductible.

When can I deduct a rental loss against my salary?

Under the current rules, if you have a net rental loss, that loss generally reduces your other taxable income in the same year. If the loss is larger than your other income, the unused amount can be carried forward.

The starting point is that the property must be rented, or genuinely held to produce assessable income on commercial terms, in the period you are claiming. The ATO looks at whether the property is advertised widely, whether the rent is in line with comparable properties, and whether you actually deal with applications. A property listed at a well-above-market rent, or held back for family use in peak periods, may not be treated as held to produce income. In that case deductions can be reduced or denied.

If you use the property yourself for part of the year, or rent out only part of a home, you have to apportion. The ATO's Jemima example, of a second bedroom listed on a sharing-economy platform for part of the year, uses both a floor-area split and a days-rented split for the shared costs. Platform fees and cleaning after a guest stay can be more directly related to the rental activity. Get the apportionment right rather than claiming 100% of the household bills.

Holiday homes have their own ATO guidance. Private use, and days the property is not genuinely available, reduce what you can claim.

Which expenses are deductible now, and which are capital?

You can generally claim a deduction for expenses incurred in gaining or producing your rental income. Common deductible holding costs include:

  • interest on money borrowed to buy the property, or to hold it as a rental, if that is the use of the borrowed money
  • agent's fees and advertising for tenants
  • council rates, land tax and water charges you cannot recoup from the tenant
  • insurance
  • repairs and maintenance
  • body corporate fees, excluding contributions to a special-purpose sinking fund that are capital in nature, which need a closer look at the ATO's detail

Interest follows the use of the funds, not the security. If you borrow against the rental property to take a holiday, or you redraw for a private car, that part of the interest is not deductible. If you borrow against your own home to buy a rental, the interest on the funds actually used to buy the rental can still be deductible.

Repairs are also a frequent source of errors. A repair generally restores something to its previous state after wear, tear or damage that happened while the property was used to produce income. Initial repairs to fix defects that were present when you bought the property are usually capital, not an immediate deduction. Replacing an entire asset, or improving it beyond a repair, is also usually capital.

Capital works, such as a structural extension or a major renovation, are generally deducted over a set period rather than in the year you pay for them. The ATO's rental guidance refers to periods of 25 or 40 years, depending on the type of work and when it was done. Plant and equipment, such as some appliances, can have separate decline-in-value rules, including limits that apply to second-hand assets in residential properties. Use the official rental guide, or a quantity surveyor's report where that is appropriate, rather than guessing a rate.

The purchase price itself is not a deduction. Stamp duty, conveyancing and similar acquisition costs generally go into the cost base of the property for CGT, as in the official example in the CGT calculator explainer. They are not a year-one rental deduction.

How large is the tax saving?

The saving is the tax and Medicare levy you no longer pay when the net rental loss reduces your taxable income. It is not equal to the loss itself.

The Never Lose Interest negative gearing calculator explainer works through a stylised 2026-27 example. A resident individual with $100,000 of taxable salary and a $15,000 net rental loss, ignoring the $1,000 standard deduction and other offsets, pays $4,800 less in income tax and Medicare levy. That is 32% of $15,000, being the 30% marginal rate plus the 2% levy. After that reduction, the person is still $10,200 out of pocket on the $15,000 shortfall, before any change in the property's value, selling costs or a later capital gain.

The saving is smaller if the loss only reduces income that would have been taxed at a lower rate, or if a low-income reduction already removes some or all of the Medicare levy. It can be larger if the loss comes off income in a higher bracket. A Medicare levy and surcharge estimate also needs care, because income for surcharge purposes adds back net rental losses. A loss that reduces taxable income can still leave your surcharge income unchanged.

HELP works in a similar way. Repayment income adds back total net investment losses, so a rental loss that reduces taxable income does not necessarily reduce the compulsory HELP repayment. See the HELP repayment explainer.

None of this is a reason, on its own, to buy a property. Interest rates, vacancies, maintenance, actual rent and the purchase price matter more than the tax line.

What changes from 1 July 2027, and what stays the same until then?

From the 2027-28 income year, the law limits where a net loss on many established residential dwellings can be used. For properties that are not grandfathered and are not a "new residential dwelling" in relation to you, the excess of deductions over residential dwelling income can no longer be deducted against salary or other non-property income. It can still be used against income from residential dwellings, including certain capital gains, and unused amounts can be carried forward.

Properties you already had an ownership interest in at 7.30 pm ACT legal time on 12 May 2026 are grandfathered for this purpose, so the current wage-deduction treatment can continue. New builds can also continue to be negatively geared, but the detailed definition of a new residential dwelling was still being completed in later legislation as at November 2026.

Until 30 June 2027, the current rules in this article continue to apply, including for established properties bought after Budget night. The change is about where a net loss can be used from 2027-28, not about expenses suddenly ceasing to be deductible.

Grandfathering for negative gearing does not freeze the CGT rules. A later sale will have its post-1 July 2027 gain taxed under the new CGT settings, unless a specific exception applies. That is covered in CGT old versus new rules.

What records should I keep?

Keep enough to show the income, the expenses, and that the property was rented or genuinely available. That usually includes:

  • loan statements and a clear trail of how borrowed money was used
  • rate notices, insurance, agent's statements and invoices for repairs
  • a record of periods the property was rented, advertised or used privately
  • contracts, settlement statements and any capital works records, which you will also need for CGT

If you cannot show that an expense was incurred in earning the rent, or that a repair was not an improvement or an initial repair, the deduction is the item the ATO is most likely to question.

Frequently asked questions

Is negative gearing only for property?

The phrase is used most often for rental property, but the same idea can apply to other investments that are held to produce assessable income and that produce a deductible loss. The 2027 quarantine is specifically about residential dwellings. Share investments have their own deduction and CGT rules.

Can I claim interest on my own home?

Not if the loan was used to buy a home you live in. Interest follows the use of the money. A loan secured by your home, used to buy a rental, is a different case from a loan used to buy the home itself.

If the property goes up in value, do I still have a loss?

You can have a tax loss in a year and a capital gain over the whole period you hold the property. They are worked out separately. The capital gain is calculated when you sell, or when another CGT event happens, as explained in the CGT calculator explainer.

Does negative gearing reduce my HELP repayment?

Not necessarily. HELP repayment income adds back total net investment losses. Model that separately.

Should I buy before 1 July 2027 to keep the current rules?

A purchase after the 12 May 2026 cut-off does not keep wage-deduction treatment from 2027-28 unless the dwelling is grandfathered or is a new build under the final definition. Buying before 1 July 2027, on its own, is not the test. Read the grandfathering and new builds guides, and get advice on the facts of the contract.

General information warning

This article is general information only. It is not personal advice, a tax assessment or a recommendation to buy, hold or sell a property. It does not take into account your objectives, financial situation or needs. Whether a particular expense is deductible, and how the 2027 rules will apply to a property, depend on the facts. Consider speaking with a registered tax agent or a licensed financial adviser before you rely on a particular result.

Sources

Last reviewed: November 2026.