Day 21: First-Time Investor's Guide to Negative Gearing and Cash Flow
Published: February 4, 2026
Reading Time: 9 minutes
Location Focus: Sunshine Coast, QLD
Negative gearing occurs when your investment property expenses exceed your rental income. This means you're making a financial loss on the property each year. While this sounds negative, negative gearing can actually be a valuable investment strategy.
When you're negatively geared, you can claim the loss against your other income, reducing your taxable income and your tax bill. For example, if you earn $100,000 in salary and your investment property has a $10,000 loss, your taxable income becomes $90,000. This tax deduction can be valuable, especially if you're in a higher tax bracket.
However, negative gearing requires you to have sufficient cash flow to cover the shortfall. If your investment property costs $10,000 more per year than it earns in rent, you need to have $10,000 available each year to cover this shortfall. If you don't have this cash flow, negative gearing isn't viable for your situation.
Positive gearing occurs when your rental income exceeds your expenses. This means you're making a profit on the property each year. While you'll pay tax on this profit, you're also building wealth through positive cash flow.
For first-time investors, the choice between negative and positive gearing depends on your financial situation and investment goals. If you have strong income and can afford to cover shortfalls, negative gearing might be appropriate. If you need positive cash flow to support your investment, positive gearing might be more suitable.
The key is understanding your cash flow situation and ensuring you can sustain your investment strategy. A mortgage broker can help you model different scenarios and understand the cash flow implications of your investment strategy.
Call to action: Ready to explore investment strategies? Call Frontier Finance at 0413 798 731. Our brokers will help you model different investment scenarios and find a strategy that works for your cash flow situation.