Negative gearing vs positive gearing: the definitions

“Gearing” simply means borrowing to invest. Whether a property is negatively or positively geared is a description of its cash position, not a verdict on whether it is a good investment.

The definitions

A property is negatively geared when the costs of holding it are greater than the income it produces. Holding costs typically include loan interest, council rates, water, insurance, property management fees, maintenance and — for units and townhouses — strata or body corporate levies. If those costs exceed the rent, the owner tops up the difference from their own pocket.

A property is positively geared when the rent covers all of those holding costs with something left over.

A property is neutrally geared when the two roughly balance.

What moves a property from one to the other

The same property can change category over time. Rent rises, interest rates move, a loan is paid down, a large maintenance bill lands — any of these shifts the balance. A property bought negatively geared can become positively geared years later, and the reverse can happen too.

Why the “which is better” question belongs with your accountant

The definitions are simple. The implications are not. How a negatively geared shortfall or a positively geared surplus is treated depends on your income, your ownership structure, your other investments and the rules in force at the time. That is precisely the territory of a qualified accountant, and it is why we ask every client to have that conversation before choosing a strategy — not after buying.

Where TNC Group fits

We help you decide what the property is for — cash flow, growth or a balance — and then select the market and the property to match. The accountant tells you what that means for your position. Both conversations happen before the search.

Next step

If you have not had the accountant conversation yet, it is a good week to book it. And if you want the whole process coordinated, book a free 15-minute call: https://leads.leads.tncgroup.com.au/widget/booking/VIiJOVAo7mhEsE3xLNrb

General information only — not tax, accounting or financial advice. Tax treatment depends on individual circumstances and current law. Speak to your accountant.