It looks like the ALP is going to break its promise on negative gearing and change the tax rules. There is a constant stream of misinformation about negative gearing, essentially taking advantage of people's ignorance.

The tax rules treat different investments like housing, shares and your business in the same way. This is important because the tax rules should try to minimise their impact on how people invest. Essentially, you get taxed on the profit, not the turnover. If you borrow money to invest in a house or the share market, the interest on that loan is a cost, and you only get taxed on the net profit, after you have paid the interest. For a housing investment, this allows people to delay the profit and make a loss for many years, if the interest on the loan is higher than the rental income. They can offset this loss against their salary (the same rule applies for share investments). Jealous people think this is "cheating" somehow, but you still have to pay the tax at the end of the day. It may end up increasing your tax bill. When you sell the investment property, you might have several hundred thousand dollars in capital gains. This will most likely push you into a very high tax bracket for that year, if not the highest.

The reason this is necessary is because otherwise the tax rules might send an otherwise viable business broke, which is not what the tax rules should be doing. People who negatively gear are not "cheating" the system. They are actually losing money on their investment until they sell it. Their income actually goes down, and the income tax they pay should reflect that. If you lump them with a tax bill they cannot afford, they will go bankrupt, be forced to sell an otherwise viable investment, or their business will go bust. All 'business activities' are treated the same way, whether it is investing in the housing market, investing in shares, or investing in your own business. Whether it is wise to make an investment that loses you money for years before you see any kind of return is a decision for the investor, not the government.

Negative gearing is heavily spruiked by wealth managers, especially in the past when they took a 2% cut on any money you invested through them. They wanted you to borrow everything you could and give them a chunk of it upfront. Their marketing was so effective that they created  a mythology around negative gearing, but the reality is that few people actually choose to invest in something that is making a loss from day 1, and when they do, they try to keep the losses small. In the back of their mind is the ever present risk that interest rates will double or triple and they will lose everything.

People complain that this rule makes housing more expensive. It doesn't. It actually makes rent cheaper. Good luck saving for your own home if your rent goes up even more. Furthermore, housing investments get treated no differently to other investments, so the rules do not skew the market towards one particular type of investment.

Another tax rule up for change is the capital gains tax discount. If you hold an investment for more than 12 months, you only pay tax on half the capital gains. This is intended to be a simple rule to make sure you are not paying tax on inflation. For example, if you own an investment whose value goes up by 6% every year, but inflation goes up by 3% every year, you are really only making 3% on it, and that is what you get taxed on. If the investment value goes up by 3%, the same as inflation, you make no real profit, but you still pay tax on 1.5%. Last century, the rule was that you had to subtract the actual inflation from your capital gains. The rule got changed, presumably because the new rule is simpler.

Another rule that is up for change: trust tax rates. This is an extension of the concept that you only get taxed on the profit, and only once. Companies generally pay a tax rate of 30%. They then pass profits on to shareholders. If you are in a tax bracket with a 30% marginal rate, the tax is already paid. You do not get taxed again. If you marginal rate is 40%, you have to pay the extra 10%. If your marginal rate is 20%, the tax department gives you the 10% back. This way the share of company profits attributed to you as a shareholder gets taxed the same way as your other income. The reason the government does it this complicated way is to make sure tax gets charged on company profits that end up going to foreigners etc. A trust does the same thing, but gives you more flexibility on who the profits go to. If you have an investment trust and give 50% of the annual income to your child or a member of the trust, the tax department treats this the same way as if that child owns 50% of all the investments owned by the trust. Again, their is no real option for cheating the tax system here. Children under 18 pay far higher rates of tax than their parents - roughly 50% of all income over $500 per year. That is not a typo. You cannot hide your income in young children. Trusts merely formalise and standardise what people would otherwise achieve in a more ad-hoc manner - distributed ownership of a group of investments. The super-rich will still do this, but without trusts it will get too complicated for your average mum and dad investor, or the legal fees may make it no longer worth it. Changing this rule will be a boon for lawyers, especially if it gets changed again when the ALP gets turfed out. But it will be bad for everyone e

see here:

https://www.ozpolitic.com/forum/YaBB.pl?num=1777878579

There's one other aspect that escapes the ignorant vis a vis NG. All of the expenses incurred during the period of ownership that are currently claimed via NG would simply become legitimate deductions from the profit of sale reducing the CGT payable by the same margin. The revenue collected by the government does not change. Only the date that the tax is paid is changed.

There's more to the 50% rule re CGT than you've highlighted. One thing often overlooked is as follows:

"Also, an averaging process was used to calculate the CGT. 20% of a taxpayer's net capital gain was included in income to calculate the taxpayer's average tax rate, and the average rate was then applied to all the taxpayer's gross income (i.e., including the capital gain in full). So if a large capital gain were to push a taxpayer into a higher tax bracket in the tax year of sale, the brackets was stretched out, allowing the taxpayer to be taxed at their average tax rate."

This is actually extremely important as it gets around the unfairness of having a one off sale pushing a taxpayer into a high marginal rate when the gain would have been earned over multiple years. This rule effectively allowed the gain to be amortised over 5 years worth of income.

It appears that Chalmers wants to go back to indexation but leave out the amortisation rule. If so, he is a prick.

Thanks Crocodile. Amortisation probably makes the two systems close to being equivalent in terms of outcome, though I think the current approach is a lot simpler.

It is hard to tell what they are going to come up with. It sounds to be like they feel the need to "do something" but haven't quite figured out what.

freediver wrote on May 7^th, 2026 at 7:22am:

Thanks Crocodile. Amortisation probably makes the two systems close to being equivalent in terms of outcome, though I think the current approach is a lot simpler. It is hard to tell what they are going to come up with. It sounds to be like they feel the need to "do something" but haven't quite figured out what.

 
Yes, the current system is much simpler and on average, same outcome. That was the reason for the change. Under the old system, one required accountants and lawyers to work it all out.

crocodile wrote on May 6^th, 2026 at 10:40pm:

There's one other aspect that escapes the ignorant vis a vis NG. All of the expenses incurred during the period of ownership that are currently claimed via NG would simply become legitimate deductions from the profit of sale reducing the CGT payable by the same margin. The revenue collected by the government does not change. Only the date that the tax is paid is changed. There's more to the 50% rule re CGT than you've highlighted. One thing often overlooked is as follows: "Also, an averaging process was used to calculate the CGT. 20% of a taxpayer's net capital gain was included in income to calculate the taxpayer's average tax rate, and the average rate was then applied to all the taxpayer's gross income (i.e., including the capital gain in full). So if a large capital gain were to push a taxpayer into a higher tax bracket in the tax year of sale, the brackets was stretched out, allowing the taxpayer to be taxed at their average tax rate." This is actually extremely important as it gets around the unfairness of having a one off sale pushing a taxpayer into a high marginal rate when the gain would have been earned over multiple years. This rule effectively allowed the gain to be amortised over 5 years worth of income. It appears that Chalmers wants to go back to indexation but leave out the amortisation rule. If so, he is a prick.

It sounds awfully complicated -
even a fairly average taxpayer would need an accountant who
understands it properly - whatever the Govt. comes up with.

Bobby. wrote on May 7^th, 2026 at 9:08am:

crocodile wrote on May 6th, 2026 at 10:40pm: There's one other aspect that escapes the ignorant vis a vis NG. All of the expenses incurred during the period of ownership that are currently claimed via NG would simply become legitimate deductions from the profit of sale reducing the CGT payable by the same margin. The revenue collected by the government does not change. Only the date that the tax is paid is changed. There's more to the 50% rule re CGT than you've highlighted. One thing often overlooked is as follows: "Also, an averaging process was used to calculate the CGT. 20% of a taxpayer's net capital gain was included in income to calculate the taxpayer's average tax rate, and the average rate was then applied to all the taxpayer's gross income (i.e., including the capital gain in full). So if a large capital gain were to push a taxpayer into a higher tax bracket in the tax year of sale, the brackets was stretched out, allowing the taxpayer to be taxed at their average tax rate." This is actually extremely important as it gets around the unfairness of having a one off sale pushing a taxpayer into a high marginal rate when the gain would have been earned over multiple years. This rule effectively allowed the gain to be amortised over 5 years worth of income. It appears that Chalmers wants to go back to indexation but leave out the amortisation rule. If so, he is a prick. It sounds awfully complicated - even a fairly average taxpayer would need an accountant who understands it properly - whatever the Govt. comes up with.

Yes, that's precisely why it was simplified to the 50% rule. Unfortunately, too many seem to think it is a perk. When properly understood it is quite fair and reasonable.

crocodile wrote on May 7^th, 2026 at 10:22am:

Yes, that's precisely why it was simplified to the 50% rule. Unfortunately, too many seem to think it is a perk. When properly understood it is quite fair and reasonable.

I never thought negative gearing was fair.
Example:
A worker can't claim car expenses on his tax yet a property developer can
claim interest payments and all sorts of things to reduce his tax
from his normal wages and salary.



Google AI:

Negative gearing is a tax strategy where the expenses of an investment property (such as loan interest, maintenance, and management fees) exceed the rental income, creating a net loss that can be offset against other taxable income like salary or wages.  This reduces the investor’s overall tax liability, with the primary goal of achieving long-term capital gains when the property is sold, rather than generating immediate positive cash flow.

Key aspects of this strategy include:

Deductible Expenses: Investors can claim interest on borrowing, property management fees, repairs, insurance, council rates, and depreciation on the building and fixtures.


Tax Offset: The net rental loss is deducted from the investor’s total taxable income, potentially resulting in a tax refund or lower tax payable, particularly for those in higher tax brackets.


Distinction from Development: While property investors use negative gearing for rental assets, property developers typically treat construction and development costs as part of the cost base for Capital Gains Tax (CGT) purposes rather than claiming them as annual income tax deductions against salary.  Interest on development loans is generally capitalized into the cost base until the property is sold, though specific tax treatments can vary based on whether the property is held as stock-in-trade or an investment.


Risks: This strategy requires investors to cover the cash-flow shortfall out-of-pocket and carries the risk that property values may not appreciate as expected or that tax laws may change.

Quote:

A worker can't claim car expenses on his tax yet a property developer can

A worker can claim car expenses. The same rules apply to both people. In fact, a worker is more likely to rack up high tax deductions this way, however in most cases the employer reimburses them directly (and tax-free) for the expense.

And FYI, a property developer who travels to site is working.

This has little if anything to do with negative gearing.

freediver wrote on May 7^th, 2026 at 11:21am:

Quote: A worker can't claim car expenses on his tax yet a property developer can A worker can claim car expenses. The same rules apply to both people. In fact, a worker is more likely to rack up high tax deductions this way, however in most cases the employer reimburses them directly (and tax-free) for the expense. And FYI, a property developer who travels to site is working. This has little if anything to do with negative gearing.

What?

You can't claim for petrol and other expenses to drive to work.

A new Toyota Camry costs $45K,
it costs money to have it serviced,
insurance,
rego,
depreciation -

none of it is tax deductable.   ::)

Quote:

You can't claim for petrol and other expenses to drive to work.

Like I said, the same rules apply to both groups. There are no "special perks" for property developers.

freediver wrote on May 7^th, 2026 at 11:42am:

Quote: You can't claim for petrol and other expenses to drive to work. Like I said, the same rules apply to both groups. There are no "special perks" for property developers.

When you work for a wage or salary there is stuff all you can claim -
certainly not car expenses to get to and from work.

Bobby. wrote on May 7^th, 2026 at 2:16pm:

freediver wrote on May 7th, 2026 at 11:42am: Quote: You can't claim for petrol and other expenses to drive to work. Like I said, the same rules apply to both groups. There are no "special perks" for property developers. When you work for a wage or salary there is stuff all you can claim - certainly not car expenses to get to and from work.

The same rules apply to everyone Bobby. It makes no difference whether you are working for a salary.

freediver wrote on May 7^th, 2026 at 2:25pm:

Bobby. wrote on May 7th, 2026 at 2:16pm: freediver wrote on May 7th, 2026 at 11:42am: Quote: You can't claim for petrol and other expenses to drive to work. Like I said, the same rules apply to both groups. There are no "special perks" for property developers. When you work for a wage or salary there is stuff all you can claim - certainly not car expenses to get to and from work. The same rules apply to everyone Bobby. It makes no difference whether you are working for a salary.

But for housing investors -


Tax Offset:
The net rental loss is deducted from the investor’s total taxable income,
potentially resulting in a tax refund or lower tax payable, particularly for those in higher tax brackets.

Bobby. wrote on May 7^th, 2026 at 2:29pm:

freediver wrote on May 7th, 2026 at 2:25pm: Bobby. wrote on May 7th, 2026 at 2:16pm: freediver wrote on May 7th, 2026 at 11:42am: Quote: You can't claim for petrol and other expenses to drive to work. Like I said, the same rules apply to both groups. There are no "special perks" for property developers. When you work for a wage or salary there is stuff all you can claim - certainly not car expenses to get to and from work. The same rules apply to everyone Bobby. It makes no difference whether you are working for a salary. But for housing investors - Tax Offset: The net rental loss is deducted from the investor’s total taxable income, potentially resulting in a tax refund or lower tax payable, particularly for those in higher tax brackets.

Yes Bobby. The same rules apply to everyone. Even wage earners are allowed to own an investment property. The same rules also apply regardless of what you are investing in. If a wage earner borrows to invest in shares, they get the same tax deduction. It follows the basic principle of paying tax on your net profit/income, not your turnover, so the tax department doesn't send individuals or companies bankrupt just because they don't have big enough profit margins.

If a wage owner earns $60k pa, and pumps $50k pa into an investment scheme that is running at a loss for the moment, the tax department is hardly going to give him a $20k tax bill.

freediver wrote on May 7^th, 2026 at 2:39pm:

Bobby. wrote on May 7th, 2026 at 2:29pm: freediver wrote on May 7th, 2026 at 2:25pm: Bobby. wrote on May 7th, 2026 at 2:16pm: freediver wrote on May 7th, 2026 at 11:42am: Quote: You can't claim for petrol and other expenses to drive to work. Like I said, the same rules apply to both groups. There are no "special perks" for property developers. When you work for a wage or salary there is stuff all you can claim - certainly not car expenses to get to and from work. The same rules apply to everyone Bobby. It makes no difference whether you are working for a salary. But for housing investors - Tax Offset: The net rental loss is deducted from the investor’s total taxable income, potentially resulting in a tax refund or lower tax payable, particularly for those in higher tax brackets. Yes Bobby. The same rules apply to everyone. Even wage earners are allowed to own an investment property. The same rules also apply regardless of what you are investing in. If a wage earner borrows to invest in shares, they get the same tax deduction. It follows the basic principle of paying tax on your net profit/income, not your turnover, so the tax department doesn't send individuals or companies bankrupt just because they don't have big enough profit margins. If a wage owner earns $60k pa, and pumps $50k pa into an investment scheme that is running at a loss for the moment, the tax department is hardly going to give him a $20k tax bill.

OK - so a hypothetical.

You're at work and your work buddy is doing the same job as you yet
he pays less tax or no tax because he has a loss making investment property?

Bobby. wrote on May 7^th, 2026 at 2:49pm:

freediver wrote on May 7th, 2026 at 2:39pm: Bobby. wrote on May 7th, 2026 at 2:29pm: freediver wrote on May 7th, 2026 at 2:25pm: Bobby. wrote on May 7th, 2026 at 2:16pm: freediver wrote on May 7th, 2026 at 11:42am: Quote: You can't claim for petrol and other expenses to drive to work. Like I said, the same rules apply to both groups. There are no "special perks" for property developers. When you work for a wage or salary there is stuff all you can claim - certainly not car expenses to get to and from work. The same rules apply to everyone Bobby. It makes no difference whether you are working for a salary. But for housing investors - Tax Offset: The net rental loss is deducted from the investor’s total taxable income, potentially resulting in a tax refund or lower tax payable, particularly for those in higher tax brackets. Yes Bobby. The same rules apply to everyone. Even wage earners are allowed to own an investment property. The same rules also apply regardless of what you are investing in. If a wage earner borrows to invest in shares, they get the same tax deduction. It follows the basic principle of paying tax on your net profit/income, not your turnover, so the tax department doesn't send individuals or companies bankrupt just because they don't have big enough profit margins. If a wage owner earns $60k pa, and pumps $50k pa into an investment scheme that is running at a loss for the moment, the tax department is hardly going to give him a $20k tax bill. OK - so a hypothetical. You're at work and your work buddy is doing the same job as you yet he pays less tax or no tax because he has a loss making investment property?

Yes Bobby.

Also, if your other mate had a second job, his marginal tax rate would depend on his total income from both jobs.

The tax department is not out to send your mate bankrupt by giving him a big tax bill in a year when he does not have to income to cover it.

But assuming your first mate makes a wise investment, eventually he will end up paying more tax. People do not have cunning plans to avoid paying tax by losing all their income on bad investments. He will pay disproportionately more tax if he gets promoted and gets a big raise just when the investment starts giving serious returns, because he will have delayed a lot of his income until he is in a high tax bracket.

Investment portfolio managers spruik this like it is a magical tax avoidance scheme, but only because they want to take a cut from the investments they are managing on your behalf, and encouraging you to borrow to invest is a good way to increase their cut. If it actually pays off, you generally pay far more tax.

FYI, he would be taking a huge risk if the interest payments were so high that he ended up with little to no income, and thus no tax bill. Interest rates go up just as often as they go down. They can even double. That literally would send him bankrupt, without the help of the tax department.

freediver wrote on May 7^th, 2026 at 3:01pm:

Yes Bobby. Also, if your other mate had a second job, his marginal tax rate would depend on his total income from both jobs. The tax department is not out to send your mate bankrupt by giving him a big tax bill in a year when he does not have to income to cover it. But assuming your first mate makes a wise investment, eventually he will end up paying more tax. People do not have cunning plans to avoid paying tax by losing all their income on bad investments. He will pay disproportionately more tax if he gets promoted and gets a big raise just when the investment starts giving serious returns, because he will have delayed a lot of his income until he is in a high tax bracket. Investment portfolio managers spruik this like it is a magical tax avoidance scheme, but only because they want to take a cut from the investments they are managing on your behalf, and encouraging you to borrow to invest is a good way to increase their cut. If it actually pays off, you generally pay far more tax.

OK - no wonder many of my work buddies used to smile so much every day. :)

Bobby. wrote on May 7^th, 2026 at 3:07pm:

freediver wrote on May 7th, 2026 at 3:01pm: Yes Bobby. Also, if your other mate had a second job, his marginal tax rate would depend on his total income from both jobs. The tax department is not out to send your mate bankrupt by giving him a big tax bill in a year when he does not have to income to cover it. But assuming your first mate makes a wise investment, eventually he will end up paying more tax. People do not have cunning plans to avoid paying tax by losing all their income on bad investments. He will pay disproportionately more tax if he gets promoted and gets a big raise just when the investment starts giving serious returns, because he will have delayed a lot of his income until he is in a high tax bracket. Investment portfolio managers spruik this like it is a magical tax avoidance scheme, but only because they want to take a cut from the investments they are managing on your behalf, and encouraging you to borrow to invest is a good way to increase their cut. If it actually pays off, you generally pay far more tax. OK - no wonder many of my work buddies used to smile so much every day. :)

I often find myself smiling when I respond to your posts here Bobby.

FYI, he would be taking a huge risk if the interest payments were so high that he ended up with little to no income, and thus no tax bill. Interest rates go up just as often as they go down. They can even double. That literally would send him bankrupt, without the help of the tax department.

It is not free money. It is risky and stressful. It forces you to have a lower quality of life because your income goes down. And it requires a lot of thought, attention and hard work. You tend to put a lot more thought and research in when it is your own money at stake compared to when you are just showing up for the salary.

Bobby. wrote on May 7^th, 2026 at 2:49pm:

You're at work and your work buddy is doing the same job as you yet he pays less tax or no tax because he has a loss making investment property?

And if your mate borrows to invest in shares the interest is tax deductible. And of course after the first tax advice by the broker, anything further is tax deductible.

freediver wrote on May 7^th, 2026 at 3:10pm:

I often find myself smiling when I respond to your posts here Bobby. FYI, he would be taking a huge risk if the interest payments were so high that he ended up with little to no income, and thus no tax bill. Interest rates go up just as often as they go down. They can even double. That literally would send him bankrupt, without the help of the tax department. It is not free money. It is risky and stressful. It forces you to have a lower quality of life because your income goes down. And it requires a lot of thought, attention and hard work. You tend to put a lot more thought and research in when it is your own money at stake compared to when you are just showing up for the salary.

I used to show up for a salary - but I did put in an honest day's work.

I never had the luxury of having extra money to buy
an investment property -
I was too busy paying off my own mortgage as fast as possible -
always way ahead on payments.
With hindsight I could have paid the minimum on my own place
and bought an investment property using the equity in my home.
The increase in house prices would have covered my arse
but I didn't know that at the time.
I played a low risk game that cost me money in the end.   

Still - I've retired owning my own place which is more
than many people have done - so I have something to be grateful for.

Some of my friends had an investment property and yes, you are right -
when they sold the Govt was owed mega tax  so
in the end they paid a lot more tax than me.

Quote:

I never had the luxury of having extra money to buy an investment property - I was too busy paying off my own mortgage as fast as possible

Well done.

Your own home is probably the best investment you will ever make. It is heavily geared - people often borrow up to 80% of the value, sometimes even more. It has a free onsite manager who is highly motivated. You get probably the lowest possible interest rate on the loan. The money you save on rent is a real return on the investment, like a fringe benefit, but it is not taxed. And the capital gains is not taxed either. Plus, it is a very stable market that doesn't crash like the share market.

Also, if you own your own home, like you do, you can borrow against it to invest elsewhere, like shares or an investment property. You can use the mortgage and take advantage of the low interest rates to use as an investment loan.

I suspect this is the real reason why housing is so expensive in Australia. People tend to overinvest in their own home, because they only get to make one investment with these perks.

But Labor is not going to touch it, except to feed the monster by giving people a cash handout for buying their first home.

Yes FD,

Talking of tax.

You gotta put in a tax return every year or you get slammed with fines -
even if you are a pensioner.

https://www.youtube.com/watch?v=PHMwK2CaP-w



May 7, 2026 

There is a quiet letter sitting in a drawer somewhere in Australia tonight — a penalty notice from the Australian Taxation Office that arrived without warning. Tonight, Professor Zlatko walks you through exactly why thousands of Australian seniors over 60 are receiving these letters in 2026, why MAY 10th is the date you cannot afford to forget, and what every retiree must do this week to stay protected.

If you receive the Age Pension, hold superannuation, earn bank interest, own shares, or have rental income — this video could save you up to $1,565 in unnecessary penalties.

Bobby. wrote on May 7^th, 2026 at 2:49pm:

OK - so a hypothetical. You're at work and your work buddy is doing the same job as you yet he pays less tax or no tax because he has a loss making investment property?

Bobby You can't offset a capital loss against your income tax. Capital losses can only be offset against capital gains.

Leroy wrote on May 7^th, 2026 at 5:50pm:

Bobby. wrote on May 7th, 2026 at 2:49pm: OK - so a hypothetical. You're at work and your work buddy is doing the same job as you yet he pays less tax or no tax because he has a loss making investment property? Bobby You can't offset a capital loss against your income tax. Capital losses can only be offset against capital gains.

Then I don't understand it.    :-[

Bobby. wrote on May 7^th, 2026 at 9:13pm:

Leroy wrote on May 7th, 2026 at 5:50pm: [quote author=bobbythebat1 link=1777937493/15#15 date=1778129390] OK - so a hypothetical. You're at work and your work buddy is doing the same job as you yet he pays less tax or no tax because he has a loss making investment property? Bobby You can't offset a capital loss against your income tax. Capital losses can only be offset against capital gains.

Then I don't understand it.    :-[/quote]

You can offset the interest you pay on an investment loan, but not a loss you make on the sale of the investment.

Bobby. wrote on May 7^th, 2026 at 9:13pm:

Leroy wrote on May 7th, 2026 at 5:50pm: [quote author=bobbythebat1 link=1777937493/15#15 date=1778129390] OK - so a hypothetical. You're at work and your work buddy is doing the same job as you yet he pays less tax or no tax because he has a loss making investment property? Bobby You can't offset a capital loss against your income tax. Capital losses can only be offset against capital gains.

Then I don't understand it.    :-[/quote]

It means the the buddy doing the same job as you pays the same amount of tax on his earnings from that job as you do. You can't offset losses against income tax.

https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/income-and-deductions-for-business/business-losses/offsetting-current-year-losses

If you're a sole trader or an individual partner in a partnership, and you meet at least one of the non-commercial losses requirements, you can offset your business losses against other assessable income (such as salary or investment income) in the same income year.

https://treasury.gov.au/review/tax-white-paper/negative-gearing

You won’t find the phrase ‘negative gearing’ in tax legislation.

It is a commonly used term used to describe a situation where expenses associated with an asset (including interest expenses) are greater than the income earned from the asset. Negative gearing can apply to any type of investment, not just housing.

Individuals who are negatively geared can deduct their loss against other income, such as salary and wages. This is consistent with the broader operation of Australia’s personal income tax system.

Australia’s tax system operates on the principle that people pay tax on their personal income, less any expenses (called deductions) in generating that income. This is similar to how business profits (that is, income less expenses) are taxed, ie tax is levied on the net profit of a business, not its gross revenue.