What does negative gearing mean?

• Negative gearing is a principle in tax law used to describe a situation where the gross income generated by an investment is less than the cost of that investment.
• For example a rental property is negatively geared when the rent earned is lower than the cost of the borrowings and related expenses of the property.
• A property is regarded as negatively geared until the costs of the loan no longer exceed the rental income. At this point the investment will generate positive returns.
• If you need more specific information about whether the legislation applies in your situation you can use our free and anonymous Ask a Lawyer service.