A property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs and capital depreciation – exceed the income it produces.
Your investment must make an income loss before you can claim a tax benefit. Therefore, it is critical that you select a property whose capital value will increase over the period in which you intend to hold it.
As a general rule, only investors with the financial capacity to absorb the effect of potential falls in property values, as well as an increased cost in interest payments, should consider negative gearing.
You can minimise the risk of gearing by: