A quick look at what negative gearing is, the pros and cons, and what professions currently use this practice most.

1. Negative Gearing
Negative gearing is the practice of
using losses on property investments
to reduce taxable income .
While negatively gearing property may
be a rational and understandable way
for low income earners to minimise tax,
do we want an ever-rising share of
Australians in leveraged property?
Is it good or bad?
33%of tax benefits from
negative gearing go to the top
10% of income earners which
disproportionally benefit
Aussies in high-paying
jobs.
1.3
millionindividuals declare
rental income and
losses each year.
100years of this tax policy
which allows taxpayers
to deduct the cost of
investments against their
income.
$3.7b
in lost revenue to the
government with the cost of
the 50% capital gains discount
costing $4 billion a year.
0
5
10
15
20
25
30
Percentage
Occupation
% of occupations with
negatively geared property
(2012-13)
But do middle income earners really benefit most
from negative gearing? Let’s look at the distribution
of negative gearing among some common
occupations.
Surgeons
Finance Managers
Mining Engineers
Teachers
We recommend using a quantity surveyor to quantify
the amount of depreciation and capital works for
residential rental properties.
Contact Baker Affleck Moffrey for more information.
07 5538 3088 || www.bakeraffleck.com
Over
 A deliberate negative gearing strategy relies on an expectation that gains from selling
the asset at a higher price will be greater, in after-tax terms, than the earlier losses.
 However, favouring investment properties over bank deposits may increase the level
of risk and debt in the economy. While negatively gearing property may be a rational and
understandable way for middle to low income earners to minimise tax, do we want an
ever-rising share of Australians in leveraged property? The underlying benefit is the rate
at which capital gains (for assets held over a year) are taxed, or discounted by 50%. This
creates a large tax cut and increases the appeal of leveraged loss-making investments.
PROS & CONS
 The main benefit of negative gearing is
that it reduces one’s taxable income and
hence their tax liability. The taxpayer is able
to deduct their net loss on a negatively
geared asset against their other income
(eg. Salary and wages.).
 Negative gearing creates more housing supply as many middle to low
income earners can now afford to enter the property market.
 Without negative gearing landlords will be
tempted to increase rent in order to recoup the
tax break.
Nurses
Sales Assistants
With the recent instability of the rental
market, we wanted to take a quick look at
what negative gearing really means.