What is negative gearing?

Gearing is simply when you borrow money to invest in an asset. When people are talking about negative gearing in the media, they are usually referring to the practice of borrowing to purchase an investment property. Negative gearing means that the rental return of the investment property is less than the interest payments and other property expenses. Negative gearing losses can be used to reduce your tax bill by offsetting the loss you have on your investment property (the difference between your interest payments and other property expenses and the rental income against your taxable income).