What is negative gearing in plain English?

Negative gearing simply means your investment property costs you more to hold than it earns in rent. In other words your rental income is less than your expenses — things like mortgage interest, council rates, property management fees, insurance and maintenance.

The gearing part refers to using borrowed money to invest. You are negatively geared when the return on that investment does not cover the cost of the debt. In Australia the government allows you to deduct that shortfall against your other income — typically your wages — which reduces the amount of tax you pay overall.

How the tax benefit actually works

Australia's tax system allows individual investors to offset a rental property loss against their employment income. This is what makes negative gearing attractive — it turns an annual loss into a tax saving.

The higher your income tax bracket the more valuable the negative gearing deduction becomes. A high income earner in the 45% tax bracket saves 45 cents in tax for every dollar of rental loss. Someone earning $60,000 in the 32.5% bracket saves 32.5 cents per dollar. This is why negative gearing has historically been more beneficial for higher income earners.

A real numbers example for Brisbane

Say you purchase a $650,000 house in Logan with an 80% mortgage at 6.2% interest. Here is what the numbers might look like in year one:

Gross rental income at 5% yield: +$32,500

Mortgage interest on $520,000 at 6.2%: -$32,240

Property management at 9%: -$2,925

Council rates and insurance: -$3,200

Maintenance and repairs: -$2,000

Annual rental loss: -$7,865

Tax saving at 32.5% bracket: +$2,556

Net out of pocket cost per year: -$5,309

So you are paying roughly $5,300 per year — about $102 per week — out of pocket to hold this property. The bet you are making is that Brisbane property values will grow enough over time to more than offset that annual cost.

Does negative gearing still work in Brisbane in 2026?

This is the real question — and the honest answer is it depends on what you are buying and where.

Brisbane's strong population growth, infrastructure investment and tight rental market have kept capital growth relatively solid compared to other capitals. The SEQ corridor — particularly areas like Ipswich, Logan, Moreton Bay and the inner north — has delivered meaningful growth over the past several years driven by interstate migration and the infrastructure pipeline leading toward the 2032 Olympics.

However negative gearing only truly works if two conditions are met. First the capital growth on your property must outpace your annual holding losses over time. Second interest rates need to remain manageable enough that your out of pocket costs do not become unsustainable. With rates elevated compared to the historic lows of 2020 to 2021 the annual losses on negatively geared properties are larger than they were a few years ago — making the capital growth requirement even more important.

When negative gearing makes sense — and when it does not

Negative gearing makes sense when you are on a higher income and the tax saving is meaningful, you are buying in a suburb with strong capital growth fundamentals, you have the cash flow to comfortably cover the annual shortfall and your investment timeline is 7 to 10 years or more to allow growth to compound.

Negative gearing does not make sense when you are on a low income and the tax saving is minimal, you are buying purely for the tax benefit without a solid capital growth thesis, you are stretched financially and the annual shortfall creates stress, or you need the investment to be cash flow positive from day one.

The bottom line for first-time investors

Negative gearing is not a strategy in itself — it is a tax outcome that results from a strategy. The strategy is buying a quality property in a growth location and holding it long term. The negative gearing is just what happens when your expenses temporarily exceed your income during the growth phase.

For first-time investors in Brisbane do not chase negative gearing for its own sake. Instead focus on finding a property with genuine capital growth potential, run the real numbers on your holding costs, make sure you can comfortably afford the annual shortfall and let the tax benefit be a bonus rather than the reason you are buying.

If you are unsure whether a negatively geared property makes sense for your specific income and financial situation speaking to a mortgage broker who specialises in investment lending is the smartest first step. They can model the real numbers for your situation before you commit to anything.