Negative Gearing in 2025: Policy Changes & Investor Strategies

Negative gearing has long been a pillar of Australian investment strategy, especially in property. But with fresh policy debates and market shifts in 2025, the age-old question is back: Is negative gearing still a smart move for Aussies looking to build wealth?

What Is Negative Gearing and Why Does It Matter in 2025?

At its core, negative gearing is when the costs of owning an investment (like mortgage interest, repairs, and maintenance) exceed the income it generates. The kicker? Investors can offset these losses against other taxable income, potentially shrinking their annual tax bill. This has made property a popular playground for savvy investors — but also a lightning rod for political debate.

In 2025, negative gearing is under renewed scrutiny. While the Albanese government has so far avoided sweeping changes, housing affordability pressures and fresh data from the Australian Taxation Office (ATO) have reignited calls for reform. According to the ATO’s latest figures, over 1.2 million Australians claimed net rental losses last year — a sign the strategy is alive and kicking, but also a reminder of its impact on the national budget.

2025 Policy Updates: What’s Changed?

This year, several key developments are reshaping the negative gearing landscape:

• Tax Integrity Crackdowns: The ATO has ramped up audits on property deductions, targeting over-claimed expenses and ensuring investors aren’t double-dipping on repairs or interest costs.
• Labor’s Cautious Approach: Despite earlier promises to restrict negative gearing to new builds, the government has held off on major reforms in the 2025 budget, citing economic uncertainty and rental market tightness.
• Interest Rate Volatility: The RBA’s cash rate, which hovered around 4.1% in early 2025, means higher mortgage costs and, for some, bigger negative gearing deductions — but also more risk if property values stagnate.

For investors, this means the rules haven’t changed — but the risks and rewards are evolving. There’s more scrutiny, and the cost-benefit equation isn’t as simple as it once was.

The Pros and Cons for Investors Right Now

So, is negative gearing still a golden ticket? Here’s how it stacks up in 2025:

• Tax Savings: If you’re in a higher tax bracket, losses on your investment property can reduce your taxable income, potentially leading to a significant refund at tax time.
• Capital Growth vs. Cash Flow: With property price growth slowing in Sydney and Melbourne but accelerating in Brisbane and regional hubs, negative gearing only works if you’re banking on long-term capital gains. If property values flatline, those annual losses can sting.
• Rental Yields: Rising rents in major cities (up 6% nationally in the past 12 months) have narrowed the gap between rental income and costs, making positive gearing more achievable for new investors.
• Regulatory Risks: While no immediate changes are slated, ongoing debate means the rules could shift — potentially affecting future tax benefits for both new and existing investors.

Take the example of Jane, a Sydney investor who purchased a two-bedroom apartment in 2022. With higher mortgage rates in 2025, her annual costs now exceed rental income by $8,000. Thanks to negative gearing, she can offset this loss against her $110,000 salary, saving around $2,960 in tax (assuming a 37% marginal rate). But if property prices stall, the long-term payoff may be less attractive — and if negative gearing rules tighten, the tax benefit could shrink overnight.

Who Should (and Shouldn’t) Consider Negative Gearing in 2025?

Negative gearing isn’t one-size-fits-all. Consider it if:

• You’re in a higher tax bracket and can comfortably absorb annual losses.
• You have a long investment horizon and expect strong capital growth in your property’s location.
• You’re prepared for policy changes and have a buffer for higher interest rates or vacancies.

Think twice if:

• You’re relying on short-term gains or need positive cash flow from day one.
• You’re heavily leveraged and vulnerable to rising rates or market downturns.
• Your investment is in a region with stagnant or declining property values.

Looking Ahead: The Future of Negative Gearing

With federal and state governments under pressure to improve housing affordability, negative gearing will remain under the microscope. While no immediate changes are locked in for 2025, investors should stay alert to budget announcements and ATO guidance. In the meantime, a careful, data-driven approach — factoring in your tax position, property outlook, and risk tolerance — is essential.