What is Positive Gearing?

How it works

Take the rent a property earns for the year and subtract every deductible expense: loan interest (usually the biggest one), council and water rates, landlord insurance, property management fees, repairs and maintenance, depreciation, strata or body corporate fees, and land tax. If what's left is a positive number, the property is positively geared, and that leftover amount is added to your other income at tax time.

Positive vs negative gearing

They're opposite ends of the same idea. A positively geared property earns more than it costs, so you get a cash surplus and a bit more taxable income. A negatively geared one costs more than it earns, so you're topping up the shortfall, but the loss can reduce your taxable income under current rules. Neither is automatically the better strategy, it depends on your income, your tax bracket, and how much cash flow you actually need day to day. Our Negative Gearing Calculator is a useful way to model either scenario for a property you're considering.

Tax on the profit

Net rental profit is ordinary assessable income. It gets added to everything else you earn and taxed at your marginal rate, there's no discount or special treatment for it the way there is for capital gains. For 2026-27, Australian resident tax rates are 0% up to $18,200, 15% from $18,201 to $45,000, 30% from $45,001 to $135,000, 37% from $135,001 to $190,000, and 45% above that, plus the 2% Medicare levy on top.

Worked example: a property collects $35,000 in rent for the year, with $28,000 in allowable deductions (interest, rates, insurance, management fees, repairs, depreciation, strata and land tax), leaving a net rental profit of $7,000. If you're in the 30% bracket, that's $2,100 in tax, for a net gain of $4,900 after tax.

A few myths worth clearing up

"Positive gearing is always better." Not necessarily. Higher-income earners in the 37% or 45% brackets often get a bigger tax benefit from a negatively geared loss than the after-tax profit from a positively geared property.

"It doesn't build wealth." It does, the surplus cash can be reinvested, used to pay down debt faster, or saved toward your next deposit.

"A property is fixed as one or the other." It isn't. Rising rents and a shrinking loan balance both push a property toward positive territory, plenty of investors start out negatively geared and drift into positive gearing over time.