Negative Gearing in 2025: Still Worth It?
Negative gearing in Australia 2025: still worth it? How falling rates change the maths, what the election means, and who the strategy actually suits now.
Negative gearing is still legal, still unchanged, and still one of the most argued-over tax strategies in the country. But the maths behind it is shifting. With the RBA now cutting rates, the losses that make negative gearing work are quietly shrinking. That changes the answer to whether it is worth it.
This is how negative gearing works in 2025, what falling rates and the election mean for it, and who the strategy actually suits now.
What negative gearing actually is
Negative gearing is simple at its core. It happens when the cost of holding a property exceeds the rent it earns.
That shortfall is a loss. Under current rules, you can offset that loss against your other income, reducing the tax you pay.
The interest on your loan is usually the biggest cost. Add rates, insurance, management, and maintenance, and many investment properties run at a paper loss.
The strategy only makes sense for one reason. Investors accept that annual loss in exchange for expected capital growth down the track.
Why 2025 changes the maths
Negative gearing depends on the size of your loss, and your loss depends heavily on interest rates.
When rates were high, losses were large, and so were the deductions. As the RBA cuts, holding costs fall, and those losses shrink.
That cuts both ways. Smaller losses mean smaller tax deductions, but they also mean the property costs you less to hold each month.
The number: The RBA cut the cash rate to 4.10% in February 2025, its first reduction since 2020, with further cuts widely expected. Every cut lowers holding costs, shrinking both the negative-gearing loss and the deduction that comes with it.
The net effect is usually positive for investors. A property moving from a deep loss toward neutral is easier to hold, even if the tax benefit fades.
It also shifts the strategy. As gearing losses shrink, the case for a property rests more on growth and yield, and less on the tax refund.
The political picture
Negative gearing is a perennial election issue, and 2025 is no exception. The campaign has put housing affordability front and centre.
Neither major party has proposed dismantling negative gearing this cycle. The settings that exist today are expected to continue in the near term.
That said, the debate never fully dies. Investors should treat any geared strategy as exposed to long-term policy risk, even if change looks unlikely now.
The lesson is not to panic, but to plan. A strategy that only works because of a tax deduction is fragile. One that works on fundamentals is not.
Who it suits, and who it doesn't
| Factor | Suits negative gearing | Works against it |
|---|---|---|
| Income | High marginal tax rate | Lower income |
| Cashflow | Can fund the shortfall | Tight monthly budget |
| Goal | Long-term capital growth | Income now |
| Timeframe | Long | Short |
| Risk appetite | Comfortable holding a loss | Prefers certainty |
The takeaway: negative gearing rewards high earners with long horizons and the cashflow to fund a loss. For everyone else, a neutral or positive property is often the safer path.
The total-return test
The real question is never "do I get a deduction." It is "does the total return justify the cost."
Total return combines capital growth with net rental income, after tax. Negative gearing only works if growth and the tax benefit together outweigh the holding loss.
The number: A negatively geared property only pays off if capital growth plus the after-tax income exceeds the cumulative holding losses over your ownership period. The tax deduction softens the loss, but it never creates the return on its own.
Run that test before you buy. A property that loses money each year and grows slowly is not a tax strategy. It is just a loss.
What investors should ask
Is negative gearing still worth it with rates falling? Often yes, but for a different reason. The tax benefit shrinks as losses fall, but the property becomes cheaper to hold, which makes it easier to keep long enough to capture growth.
Will the election change negative gearing? No major change has been proposed by either major party this cycle. The longer-term policy risk remains, so build strategies that work on fundamentals, not just the deduction.
Should I aim for negative or positive gearing? It depends on your income and cashflow. High earners chasing growth often accept negative gearing, while those needing income lean toward neutral or positive properties.
Does negative gearing make a bad property good? Never. The deduction reduces a loss, but it cannot manufacture a return. The property still has to deliver growth or yield to be worth holding.
How do I know if my property is negatively geared? Compare your annual rent to your total holding costs, including loan interest. If costs exceed rent, you are negatively geared, and the gap is your deductible loss.
The bottom line
Negative gearing remains a legitimate strategy in 2025, but falling rates are reshaping how it works, shrinking the tax benefit while making properties cheaper to hold. The strategy still suits high earners with long horizons and the cashflow to fund a shortfall, and it still demands that the total return stack up before any tax benefit is counted. Treat the deduction as a cushion, not a reason to buy, and stress-test every deal on growth and yield first. This is general information, not tax advice, so confirm your position with a qualified accountant. Use Clear Yield's tracking tools to keep your income, costs, and deductions accurate and audit-ready at tax time.