negative gearing

Negative gearing is a tax strategy in Australia that allows property investors to deduct the costs of owning an investment property (such as interest on a loan, property management fees, and repairs) from their assessable income. If these costs exceed the rental income generated, the resulting loss can be offset against other income, such as salary and wages, thereby reducing the investor's overall tax liability. This policy has been a subject of significant debate, with proponents arguing it encourages investment in rental properties and increases housing supply, while critics contend it inflates property prices and disproportionately benefits higher-income earners. The policy is currently newsworthy due to proposed reforms announced in Australia's 2026 federal budget by Treasurer Jim Chalmers. These changes aim to reform both negative gearing and capital gains tax (CGT) related to housing. A coalition of housing and community groups is urging politicians to support these proposed changes, framing them as 'long overdue' reforms. The current relevance lies in the potential impact these reforms could have on the Australian housing market, investment strategies, and government revenue.