How the cash shortfall arises
Rent may not cover interest, management fees, rates, insurance, repairs and other costs. The investor pays the difference from other income, so affordability should be tested without relying on future capital growth.
Tax treatment is personal
Deductibility depends on Australian tax law and individual circumstances. Finance information is not tax advice, and investors should confirm treatment with a registered tax agent.
Model risks as well as benefits
Vacancy, repairs, rate rises and income changes can widen the shortfall. Compare principal-and-interest and interest-only cash flow, and keep a suitable buffer.
Key points
- Negative gearing involves a real cash loss
- Tax outcomes vary
- Capital growth is not guaranteed
- A buffer matters
Frequently asked questions
Does negative gearing make a poor property a good investment?
No. A tax deduction does not remove the loss or guarantee growth. Assess the investment on its own merits.
Will lenders count the full rent?
Usually not. Many lenders use only part of expected rent and apply their own expense and repayment assumptions.