What is negative gearing – and is it right for you?
At McMillans Accountants Traralgon, we believe in building long-term financial strength—and sometimes that includes taking a smart approach to borrowing.
Let’s explore a commonly misunderstood term: negative gearing.
Understanding gearing and debt
Gearing simply means borrowing money to invest. While “debt” often gets a bad rap, not all debt is bad. When used strategically, it can help you grow wealth and improve your financial position.
So, what is negative gearing?
Negative gearing occurs when the costs of owning an investment—like interest on the loan, maintenance, and other expenses—exceed the income the investment brings in. That means you’re making a loss.
It may sound counterintuitive, but this loss can actually work in your favour—because in many cases, it can reduce the amount of tax you have to pay.
A simple example
Here’s how negative gearing might impact your tax position:
You’ve saved on tax—but you’ve also made a loss. That’s where strategy becomes critical.
Why would anyone invest to lose money?
Great question. The real goal of negative gearing isn’t just a tax saving—it’s long-term capital growth.
If the value of the investment (like a rental property or share portfolio) increases enough over time, it can outweigh the short-term losses from holding costs. You’re essentially playing the long game—trading short-term pain for long-term gain.
But this only works if:
The investment is carefully chosen,
You’ve got the right loan structure, and
It fits your financial goals and risk tolerance.
How McMillans can help
Negative gearing isn’t a one-size-fits-all solution. At McMillans, we take the time to understand your full financial picture and guide you on:
Structuring your ownership for tax efficiency
Reviewing cash flow and equity requirements
Choosing the right loan structure and interest strategy
Planning for annual profit and loss schedules
Identifying tax-deductible expenses
Managing capital gains and tax variations throughout the year
Whether you're investing in residential, retail, commercial or industrial property—or considering shares or managed funds—we’ll help you make informed, confident decisions.
Let’s talk before you invest
Negative gearing can be powerful—but only if you get it right. Speak with our expert advisors to create a strategy tailored to your circumstances and goals.