Positive vs. Negative Gearing Explained

Gearing refers to borrowing money to invest. Whether your property is "positively" or "negatively" geared depends on whether the rent covers all the property’s expenses, including your mortgage interest.

Key Concepts

• Negative Gearing: Your expenses (interest, rates, repairs) are higher than the rent. The "loss" can often be used to reduce the tax you pay on your salary.
• Positive Gearing: The rent is higher than all expenses. This provides you with extra monthly income, but that income is taxable.

How it works in PropKeeper

PropKeeper monitors your cash flow in real-time. By comparing your logged income against your mortgage payments and expenses, the app shows you exactly where you sit on the gearing spectrum.

Which is Better?

• Negative Gearing is often a strategy for those seeking long-term capital growth in high-value areas, using tax breaks to help "hold" the property.
• Positive Gearing is a strategy for those seeking immediate cash flow and "passive income."

Pro Tip

A property can be "cash-flow positive" after tax even if it is negatively geared. This happens when "non-cash" deductions, like depreciation, bring your taxable income down enough to trigger a significant tax refund.