Understanding Negative Gearing and Its Benefits

A property is negatively geared when the costs of owning it (such as interest on the loan, bank charges, maintenance, repairs, and capital depreciation) exceed the income it generates. In simple terms, your investment must incur a loss before you can claim a tax benefit.

How It Benefits People on Higher Incomes
Negative gearing can be particularly advantageous for individuals with higher incomes. The losses incurred from the investment property can be offset against their taxable income, reducing their overall tax liability. This means that while the property may be making a loss, the tax savings can help to mitigate this, making it a more attractive investment strategy for those in higher tax brackets.

By leveraging negative gearing, high-income earners can potentially reduce their tax burden while building a property portfolio that may appreciate in value over time.