A tax
deduction
is not
a return.

Negative gearing is one number in a larger equation. Understand the cash loss, the taxable loss and the difference between them.

Negative gearing in plain English

You earn $31,200 in rent. You pay $38,000 in interest, plus rates, insurance, management and repairs. The property loses money on paper and in cash. That loss can reduce your taxable income — and therefore your tax bill.

That is negative gearing: holding a property whose deductible costs exceed its assessable income, and the tax adjustment that follows.

The worked example

Here is a simple annual picture for one property. Both cash and taxable columns appear because they answer different questions.

Rent received	$31,200
Interest	$38,000
Property management	$2,200
Council and water charges	$3,400
Insurance	$1,500
Repairs and other costs	$2,000
Cash result	-$15,900
Estimated deductible result	-$14,600
Illustrative tax effect	$5,694
After-tax annual contribution	$10,206
After-tax weekly contribution	$196

Illustrative example. The tax effect depends on your marginal situation. Verify with an accountant.

Cash loss versus taxable loss

Use explicit labels. A cash expense leaves your account. A tax deduction lowers your taxable income. A non-cash deduction (like capital works) lowers taxable income without cash out. A non-deductible cash outflow (like a principal repayment) is cash out without any tax benefit.

Negative gearing mostly works through the deductible interest. It does not make a weak property strong — it reduces the pain of holding one.

It varies by investor

The same property does different things to different owners. Your marginal tax rate, ownership structure, whether you use principal-and-interest or interest-only, and your other income all change the outcome. That is why the calculator asks about you, not just the property.