Negative gearing is a form of financial leverage where an investor borrows money to buy an asset, but the income generated by that asset does not cover the expenses and interest on the loan. (When the income does cover the interest it is called positive gearing.)

Tax Benefits;

• Interest on an investment loan for an income producing purpose is fully deductible, even if the income falls short of the interest. Any shortfall ends up offsetting income from other sources, such as wage and salary income for an individual.

• Ongoing maintenance and small expenses are similarly fully deductible.

• Property fixtures and fittings are treated as plant, and a deduction for depreciation is allowed, based on effective life. When later sold the difference between actual proceeds and the written-down value becomes income, or further deduction.

• Owners can also claim depreciation of capital works, specifically for building and landscaping. The current rate is 2.5% over 40 years