What is negative gearing in Australia

Here's a simple explanation of negative gearing in Australia:

🏠 Imagine this:

Let’s say you buy a house to rent out — not to live in. You borrow money from the bank (get a loan), and you have to pay interest on that loan every month.

You also earn rent from the people living in that house.

📉 What if you're losing money?

If the money you earn from rent is less than the money you spend (like loan interest, repairs, council rates, etc.), then you’re losing money — that’s called:

🎯 Negative gearing

👨‍👩‍👧 Why do people still do it?

Because in Australia, the government says:

“Even if you’re losing money on your investment, you can subtract that loss from your salary income when calculating your tax.”

That means:

• You pay less tax now
• You hope the house price will go up later, so you make a big profit when you sell

💡 Example:

• You earn $50,000 from your job
• You lose $5,000 from your rental property (because rent < expenses)

Then the tax office says:

"Okay, we’ll tax you only on $45,000 instead of $50,000."

So you pay less tax this year.

🎲 Risk?

Yes. You're losing money every year, hoping the house will be worth more later. If prices fall, you can lose even more.

🏁 Summary:

Negative gearing is when you:

• Buy an investment (like a house)
• Spend more than you earn from it
• But get a tax break to help cover your loss (in Australia)