What negative gearing actually is
A property is negatively geared when the deductible costs of owning it — loan interest, rates, insurance, agent fees, repairs, depreciation — exceed the rent. That net loss reduces your taxable income, and the ATO effectively refunds tax at your marginal rate plus Medicare. What the strategy's cheerleaders skip: the refund covers only part of the loss. A $15,000 annual loss for someone on a 32% effective marginal rate returns $4,800 at tax time and leaves $10,200 of real money gone — about $196 a week. Negative gearing is a bet that capital growth will beat that after-tax bleed; the tax treatment softens the loss, it doesn't create a profit.
Details that change the numbers
Only the interest on the loan is deductible, never principal repayments. Depreciation is the one "paper" deduction — a quantity surveyor's schedule can add thousands in deductions without cash leaving your pocket, and on newer builds it often decides whether the after-tax position is bearable. Repairs are deductible now; improvements are capital and only help at sale. And remember the exit: the deductions you claim reduce holding costs today, but the capital gain at sale faces CGT — use our CGT calculator to model the round trip.