#318: Is Negative Gearing Worth It? - The Advantages, Risks, Common Mistakes & Expert Advice for Successful Property Investing

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🎙️ In today’s deep dive, Cate, Dave, and Mike tackle one of the most hotly debated and widely misunderstood concepts in Australian property investing: negative gearing.

💡 What is Negative Gearing?
Cate kicks things off by asking Dave to explain negative gearing in plain English. Dave defines it as a situation where the rental income from a property is less than the expenses to hold it—meaning you’re running at a loss. This loss, however, can be claimed as a deduction against your taxable income, reducing your annual tax bill. Dave breaks it down with an example that shows how an investor on a $150,000 salary could claim a $10,000 property loss and receive a $3,700 tax refund.

🧾 What Expenses Are Deductible?
Cate turns to Mike for a breakdown of what costs are deductible. From loan interest and council rates to insurance, advertising, and repairs, Mike lays out the most common deductions. He also covers longer-term deductions like capital works and depreciation, explaining how investors can claim on both building structure and assets like appliances. Borrowing costs are also covered, which can be claimed over five years.

📉 Is This Just a Property Loophole?
Cate challenges the idea that property investors are uniquely advantaged. Dave clarifies that negative gearing applies across asset classes, including shares and businesses. Far from being a loophole for the mega-rich, data from the ATO shows that most property investors are regular Australians—with 71% owning just one property. Cate and Dave stress that negative gearing supports the private rental market, filling a gap that government housing can’t meet.

📈 Why Lose Money?
Why would anyone invest in something that loses money? Mike explains that negative gearing is often a long-term strategy, with investors betting on future capital and rental growth. Over time, rents rise and loans reduce, leading to positive cash flow. Dave notes that this typically takes 5–10 years and depends on factors like yield, interest rates, and location.

🚫 Common Mistakes & Misconceptions
Dave warns against chasing tax deductions without regard for asset quality. Properties promoted as "cheap to hold" often underperform in the long term. Mike cautions against buying from spruikers and highlights the risk of investing in areas with high yields but poor growth prospects. ⚖️ Positive vs. Negative Gearing
While positive gearing sounds appealing, Dave and Mike explain that it’s not always feasible—especially in today’s market with rising interest rates and low rental yields. Cate highlights that high-yielding properties are often found in low-growth areas, which may not be the best choice for building wealth.ity — offering practical insights to reduce friction and risk in the finance process.

....and our gold nuggets!


Mike Mortlock's gold nugget: Mike considers the benefit of cashflow versus capital growth, and highlights that the best investors are the ones who are focused on long term capital growth. 

David Johnston's gold nugget: Investing requires long term thinking and investors are encouraged not to chase shortcuts. Understanding how the numbers change over time and utilising negative gearing as a tool is critical. But tax deductions are a benefit, not a reason to invest. 

Cate Bakos's gold nugget: A high land to asset ratio can go hand in hand with great capital growth. High tax depreciation opposes land to asset ratio though. There is a correlation! 

Show notes: https://www.propertytrio.com.au/2025/07/14/negative-gearing-is-it-worth-it/