Negative Gearing and CGT

Negative Gearing:

Negative gearing is an investment strategy where you purchase a property investment where your rental income will be less than your rental expenses like Building depreciation, interest on mortgage, management fees and etc.


Advantage of Negative Gearing:

Negative Gearing is very popular because by law you can offset your rental losses against your wages.


Positive Gearing:

Occurs when you receive more in rental income from your tenants than what you pay on like loan interest, property maintenance, management fees, rates etc.



Capital Gains Tax applies generally to net gains made on disposal of Rental Property, where the amount receivable is greater than the costs, and reduced by any capital losses.

When a net gain is determined according to the CGT rules, an amount is included in taxable income, to be taxed along with ordinary income. The effect is to tax taxable capital gains at the marginal tax rate of the taxpayer; however there are a number of concessions, exclusions and discounts which operate to dilute the tax effect.

50% Discount on property investment Capital Gain(CG) will apply if you hold asset for over 12 month.


CGT Exemptions

  • Assets acquired pre-20 September 1985 (unless some event has brought them into the post-1985 net).


  • Family Main resident