Negative gearing occurs when the expenses associated with an investment property – such as mortgage interest, property management fees, and rates – exceed the rental income it generates. As of December 2025, this creates a tax-deductible loss.
In 2026, for Melbourne property owners, particularly in the Eastern Suburbs where property values remain relatively high, negative gearing is a common strategy. Currently in Melbourne, the median dwelling value is $823,495, and while moderate growth is forecast, many investors still experience a shortfall between rental income and property costs. This loss isn’t a cashflow benefit in itself, but it can reduce your overall taxable income. It’s important to realise that capital gains tax (CGT) will apply when the property is eventually sold, and the discount on CGT for properties held over 12 months remains in place. Sellers considering negative gearing should understand that the tax benefits are linked to holding the asset, and the strategy’s effectiveness depends on future capital growth. Fletchers’ experience across the Eastern Suburbs shows that properties near quality schools and transport links generally demonstrate stronger long-term capital growth potential. The impact of negative gearing is individual and dependent on personal income and tax circumstances.
Negative gearing is a tax strategy that allows investors to offset property expenses against other income, but it’s crucial to consider the long-term implications and potential capital gains tax liability.