Positive vs Negative Gearing Explained for Brisbane Investors

The positive vs negative gearing debate sounds technical, but the idea is simple. It just describes whether your rental income covers the cost of holding the property, or falls short of it.

Quick Summary

A positively geared property earns more than it costs and adds taxable income. A negatively geared one runs at a loss that can usually offset your other income.

Neither is automatically better. One prioritises cash flow today, the other trades cash flow for a tax deduction and, usually, a bet on capital growth. This guide explains both, with the numbers that actually matter.

A Loan For You structures investment lending so the cash flow works in real life, not just on paper - at no cost to you. Book a free investment lending review.

Key Highlights

Gearing simply means borrowing to invest, and the label describes your cash flow position.
A negatively geared property costs more to hold than it earns, creating a loss you can usually offset against other income.
A positively geared property earns more than it costs, producing income that is taxable.
Negative gearing reduces your tax, but you are still out of pocket in real cash each year.
Positive gearing suits investors who want income now; negative gearing usually banks on capital growth.
Deductible costs include interest, rates, insurance, management fees, repairs and eligible depreciation.
Individuals who hold an asset over twelve months generally qualify for a 50% capital gains tax discount.

Quick Summary

In positive vs negative gearing, a positively geared property earns more than it costs and produces taxable income, while a negatively geared one runs at a loss that can usually be offset against your other income.

A tax deduction is not a reason to lose money. Negative gearing only makes sense if the growth you expect outweighs the cash you are putting in every year.
Philip Jenkins, A Loan For You

Positive vs Negative Gearing at a Glance

	Positively geared	Negatively geared
Cash flow	Income exceeds costs	Costs exceed income
Tax effect	Adds taxable income	Loss offsets other income
Out of pocket	No, it pays you	Yes, each year
Usual focus	Income now	Capital growth later
Typical yield	Higher	Lower
Suits	Income-focused investors	Higher earners expecting growth

What Gearing Actually Means

Gearing is just borrowing to invest. The positive or negative label describes the relationship between what the property earns and what it costs you to hold.

Positively geared: rent exceeds your interest and running costs.
Negatively geared: rent falls short, so you top it up from your own pocket.
Neutrally geared: the two roughly cancel out.

Your position can change over time. A negatively geared property often turns neutral or positive as rents rise and the loan balance falls.

How Negative Gearing Works

If your deductible costs exceed your rental income, you make a loss on the property. In Australia, that loss can generally be offset against your other income, reducing your overall tax.

The saving depends on your marginal tax rate, which is why negative gearing Australia strategies tend to appeal more to higher income earners.

You still fund the shortfall in real cash every year.
The tax benefit refunds only part of that shortfall, never all of it.
The strategy relies on capital growth making up the difference.

Put plainly: you are accepting a known annual cost in exchange for an uncertain future gain. That can be sensible, but it should be a deliberate choice.

How Positive Gearing Works

A positively geared property produces more rent than it costs to hold. The surplus is income, so it is added to your taxable earnings.

It improves your cash flow from day one.
It can strengthen your borrowing capacity for the next purchase.
The surplus is taxable, so set some aside for tax time.

Higher rental yield properties are more likely to be positively geared, though they often sit in areas with more modest capital growth. Rental yield is simply annual rent as a percentage of the property value.

What You Can Actually Claim

Only genuine costs of earning rental income are deductible, and only while the property is rented or genuinely available for rent.

Loan interest on the investment portion of your borrowing.
Council rates, water charges and body corporate fees.
Landlord insurance and property management fees.
Repairs and maintenance, though improvements are treated differently.
Depreciation, subject to the rules that apply to your property.

Depreciation rules changed in 2017 for second-hand residential plant and equipment, so what you can claim depends on when and how you bought. Confirm with your accountant.

The Cash Flow vs Growth Trade-Off

This is the real decision behind positive vs negative gearing, and it is a question about you rather than about the property.

Cash flow focus: you want the portfolio to pay its own way now.
Growth focus: you can fund shortfalls and want long-term capital gain.
Balance: many investors mix both across a portfolio over time.

Your income stability matters as much as the numbers. A shortfall you can comfortably fund is a strategy; one you cannot is a risk.

Other Costs Investors Forget

The gearing calculation only works if you have counted everything, including the costs that appear irregularly.

Vacancy periods between tenants.
Repairs, and larger items like hot water systems or appliances.
Queensland land tax, once your taxable landholdings pass the threshold.
Investors pay full transfer duty, with no first home concession.

Capital Gains Tax on Sale

When you sell, any gain is generally assessable. This is where the growth side of the strategy finally gets tested.

Individuals holding an asset over twelve months usually get a 50% discount.
The gain is added to your income in the year you sell.
Costs of buying and selling can reduce the assessable gain.

How Lending Fits In

Your loan structure has a direct effect on which side of the line you land, and how flexible you are later.

The rate and repayment type change your annual holding cost.
Keeping investment and home borrowing separate simplifies your records.
Only part of expected rent is counted toward your borrowing capacity.

Your repayment type matters too. Our guide to interest only versus principal and interest compares both for investors.

Our guide to using equity to invest explains how to fund a deposit without fresh savings.

Frequently Asked Questions

What is the difference between positive and negative gearing?

In positive vs negative gearing, a positively geared property earns more rent than it costs to hold, producing taxable income. A negatively geared property costs more than it earns, creating a loss that can usually offset your other income.

Is negative gearing worth it?

It can be, if you can comfortably fund the annual shortfall and the property grows in value. The tax deduction refunds only part of what you spend, so it should never be the sole reason to buy.

How does negative gearing Australia work for tax?

The loss on the property is generally offset against your other income, lowering your taxable income. The benefit depends on your marginal tax rate, which is why the strategy appeals more to higher income earners.

Is positive gearing better for beginners?

Often, yes. A property that pays its own way puts less strain on your budget and can support your borrowing capacity for a future purchase. The surplus is taxable, so set money aside for tax time.

What expenses can I claim on an investment property?

Loan interest, council rates, water, body corporate fees, landlord insurance, property management fees, repairs and eligible depreciation. Improvements are treated differently to repairs, so confirm the distinction with your accountant.

Can a property change from negative to positive gearing?

Yes, and many do. As rents rise and your loan balance falls, the shortfall shrinks and can eventually become a surplus. Rate movements and your repayment type also shift the position.

Do investors pay stamp duty in Queensland?

Yes, at full standard rates. First home concessions apply only to buyers purchasing a home to live in, so investment purchases attract the full transfer duty, which should be built into your upfront budget.

What about capital gains tax when I sell?

Any gain is generally assessable in the year you sell. Individuals who have held the asset for over twelve months usually qualify for a 50% discount, and buying and selling costs can reduce the assessable gain.

Talk to a Brisbane Investment Loan Specialist

Whether positive vs negative gearing suits you depends on your income, your buffer and your goals. A Loan For You structures the lending so the numbers work in real life.

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Reviewed and Verified

This guide was reviewed by Philip Jenkins, principal broker at A Loan For You (Credit Representative 365865). With almost 20 years arranging investment lending for Brisbane clients, Philip keeps every point aligned with current lender policy.

General information only, not tax or financial advice, and correct as at July 2026. Tax rules change and depend on your circumstances - confirm your position with your accountant and read the ATO rental property guidance before you act.

Positive vs Negative Gearing Explained for Brisbane Investors