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Negative gearing in Australia primarily benefits middle and higher-income earners, with approximately 1.1 million Australians claiming deductions annually.
As of September 2025, nearly 70% of negatively geared property investors earn less than $80,000 per year, though the top 20% of income earners receive 60% of the total benefits. The Australian government foregoes $12.3 billion in tax revenue annually through negative gearing deductions, making it one of the country's most significant property investment incentives.
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Negative gearing affects over 2.2 million Australian property investors, with nearly half (49.4%) currently negatively geared.
The system costs the government billions in foregone revenue while primarily benefiting higher-income earners through tax deductions.
| Key Metric | Current Figure (2025) | Impact |
|---|---|---|
| Australians claiming negative gearing | 1.1 million annually | Tax deductions against salary income |
| Government revenue foregone | $12.3 billion (2024-25) | Projected to reach $14.5 billion by 2034-35 |
| Total property investors | 2.26 million Australians | 49.4% are negatively geared |
| Single property owners | 73% of negative gearers | Most investors own just one property |
| Income bracket concentration | 70% earn under $80,000 | Top 20% receive 60% of benefits |
| Total deductions claimed | $10.4 billion (2022-23) | $4.8 billion from multi-property owners |
| Median investor income | $88,751 | Middle-income earner profile |
Who is actually using negative gearing in Australia right now?
Negative gearing is primarily used by middle-income Australian workers across diverse professions.
As of September 2025, approximately 1.1 million Australians claim negative gearing deductions annually. The profile includes teachers, nurses, police officers, electricians, and truck drivers, with nurses being the second-largest profession using negative gearing after one other occupation. These investors span all income levels, though most earn between $50,000 and $100,000 annually.
The typical negative gearing user owns a single investment property and works in a stable employment role. Contrary to popular perception, these are not wealthy property moguls but everyday Australians using property investment to build long-term wealth. About 73% of negatively geared investors own just one property, while only 9% own three or more properties.
The strategy remains attractive because Australia's tax system allows investors to offset rental losses against their salary income, providing immediate tax relief while they wait for capital growth over the long term.
How many Australians claim negative gearing deductions each year, and how has that changed over time?
Negative gearing participation has remained relatively stable over recent years, with approximately 1.1 million Australians claiming deductions annually.
The latest Australian Tax Office statistics show that out of 2.26 million property investors in 2022-23, exactly 1,117,175 (49.4%) were negatively geared. This represents a consistent pattern where roughly half of all property investors operate at a rental loss. The number of people claiming rental property deductions has grown gradually, reaching over 2.2 million in 2020-21.
Historical data shows the practice has deep roots, with negative gearing provisions dating back to 1936. The only significant interruption occurred between 1985-1987 when the Hawke government temporarily restricted the ability to offset property losses against wage income. This brief abolition led to substantial rent increases and was quickly reversed in 1987.
Since then, participation rates have grown steadily alongside Australia's property market expansion, particularly accelerating after the introduction of the 50% capital gains tax discount in 1999.
What is the average income bracket of people who negatively gear properties?
The median income for negatively geared property investors is $88,751, placing most participants in the middle-income category.
Nearly 70% of people with negatively geared properties have taxable incomes below $80,000 per year, according to Treasury data. However, this statistic requires careful interpretation. While the majority of users are middle-income earners, the largest financial benefits flow to higher earners who can claim larger deductions against higher tax rates.
The largest single group consists of 524,220 investors with annual incomes between $50,001 and $100,000 who own one investment property. These middle-income professionals represent the core demographic using negative gearing as a wealth-building strategy.
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How much tax does the government forgo each year because of negative gearing?
The Australian government foregoes $12.3 billion in tax revenue through negative gearing deductions for the 2024-25 financial year.
This figure has grown substantially from $6.7 billion in 2014-15, representing an 83% increase over a decade. Parliamentary Budget Office projections show this cost will continue rising, reaching $14.5 billion by 2034-35 as property prices and interest rates drive larger rental losses.
The revenue foregone represents one of Australia's largest tax expenditures. Combined with the capital gains tax discount, the total annual cost to government reaches approximately $17.7 billion in 2024-25. Over the past decade, foregone revenue from both negative gearing and capital gains taxation has totalled more than $80 billion.
This substantial cost has prompted ongoing political debate about whether the economic benefits justify the revenue loss, particularly given Australia's housing affordability crisis.
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What percentage of negatively geared investors own just one property compared to those who own multiple properties?
Approximately 73% of negatively geared investors own just one investment property, dispelling myths about wealthy property empires.
Of the 1.117 million negatively geared investors in 2022-23, about 810,875 own a single property while 306,300 own two or more properties. This means roughly three-quarters of negative gearers are small-scale investors with modest portfolios.
Among those with multiple properties, 18% own exactly two properties, while only 9% own three or more. The concentration of multiple property ownership is relatively small, with just 13.5% of all property investors (306,300 people) owning multiple negatively geared properties.
This data contradicts public perceptions of negative gearing being dominated by wealthy investors with large portfolios. The reality shows most participants are ordinary Australians using a single investment property to supplement their retirement savings.
Which cities and regions see the highest concentration of negatively geared properties?
Sydney and Melbourne have the highest concentrations of negatively geared properties, reflecting their expensive property markets and high rental demand.
Queensland leads states in negative gearing usage rates, with 79% of surveyed property investors using the strategy, followed by South Australia (77%), NSW (75%), Victoria (72%), and Western Australia (59%). Regional areas show slightly higher usage rates (77%) compared to metropolitan areas (74%).
Major capital cities dominate because higher property prices create larger gaps between rental income and holding costs, making negative gearing more common. Sydney's median dwelling price of $896,613 in capital cities means substantial borrowing costs that typically exceed rental returns in the short term.
Interestingly, Queensland hosts about 25% of all Australian rental properties despite having less than 20% of investors, indicating significant interstate investment flows from southern states into Queensland's more affordable markets.
How much rental housing supply does negative gearing actually add to the market?
Negative gearing provides modest additions to rental supply, but most investment goes toward existing properties rather than new construction.
Treasury and AHURI research confirms that negative gearing does encourage rental supply, but the impact on net new housing stock is relatively small. Only 18% of the $122 billion lent to housing investors between July 2023 and July 2024 was for newly constructed or newly built dwellings, while 75% went toward purchasing established properties.
This means most negatively geared investment competes with first-home buyers for existing stock rather than expanding overall housing supply. The 2.2 million investment properties do provide rental accommodation, but they represent recycled existing housing rather than additional dwelling construction.
While negative gearing supporters argue it increases rental supply, critics note that without corresponding new construction, the policy simply transfers ownership from potential owner-occupiers to investors without solving housing shortages.
Do negatively geared investors charge lower rents than non-geared landlords?
Evidence shows negatively geared investors do not consistently charge lower rents than other landlords, as rental prices are determined by market conditions rather than ownership structure.
Rental rates are set by supply and demand dynamics in local markets, not by whether a landlord claims tax deductions. A negatively geared investor facing $2,000 monthly losses will still charge market rent to minimize their losses, not offer below-market rates that would increase their tax deductions.
Australian rental markets operate on competitive pricing where tenants bid for available properties. Properties in the same location with similar features command similar rents regardless of the landlord's tax position. Market forces, not tax strategies, drive rental pricing decisions.
Some analysts suggest negatively geared investors might actually charge higher rents to reduce their losses, though this is constrained by what tenants can afford to pay in each local market.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Australia versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
What proportion of first-home buyers are effectively competing with negatively geared investors?
First-home buyers frequently compete directly with negatively geared investors, particularly in established property markets where both groups target similar homes.
With 75% of investor lending going toward established properties, first-home buyers face significant competition from the 1.1 million negatively geared investors. This competition is most intense in markets priced between $400,000-$800,000 where both demographics can realistically compete.
The impact varies by location and property type. In Sydney and Melbourne's inner suburbs, investors often outbid first-home buyers who cannot match the financial capacity of established property investors with existing equity. Regional markets see similar competition as investors seek higher rental yields outside expensive capital cities.
Current statistics show first-home buyer loans fell 3.2% in September 2024 to just 9,686 loans nationwide, partly reflecting this competitive pressure from investors who can leverage negative gearing tax benefits to justify higher purchase prices.
How much capital gain do negatively geared investors typically make over a 10- or 20-year period?
Negatively geared investors typically achieve substantial capital gains over 10-20 year periods, often exceeding their accumulated rental losses.
| Investment Period | Typical Capital Gain | Annual Growth Rate |
|---|---|---|
| 10 years | 80% - 120% | 6% - 8% annually |
| 15 years | 150% - 200% | 6.5% - 7.5% annually |
| 20 years | 250% - 350% | 6% - 8% annually |
| Sydney (2004-2024) | 320% | 7.2% annually |
| Melbourne (2004-2024) | 280% | 6.8% annually |
| Brisbane (2004-2024) | 240% | 6.2% annually |
| Perth (2004-2024) | 180% | 5.2% annually |
What would happen to property prices if negative gearing rules were tightened or removed?
Economic forecasts indicate property prices would fall by 8-12% if negative gearing was significantly tightened or removed, while rents would likely rise modestly.
Multiple academic studies estimate the impact: the Grattan Institute suggests 1-2% price increases from current negative gearing, ANU research shows 1.5%, while Deloitte Access Economics estimates 4%. Reversing these policies would theoretically reduce prices by similar amounts.
The 1985-1987 historical precedent provides real-world evidence. When negative gearing was temporarily abolished, rental supply decreased and rents rose by 10-70% across different Australian markets within three years. Property prices showed mixed results, with some markets declining while others remained stable.
Contemporary modeling suggests tightening rules would reduce investor demand, potentially improving affordability for first-home buyers but creating rental supply concerns. The ACTU's proposed limitation to one property per investor could raise $1.5 billion annually while affecting only 13.5% of current investors.
Who ultimately benefits more from negative gearing in Australia — higher-income investors, middle-class households, or renters?
Higher-income investors receive the greatest financial benefits from negative gearing despite middle-income earners representing the largest number of users.
While 70% of negative gearers earn under $80,000, the top 20% of income earners receive 60% of the total benefits according to Parliamentary Budget Office analysis. This occurs because higher-income earners can claim larger deductions against higher marginal tax rates, maximizing their tax savings per dollar of loss.
Middle-class households benefit through wealth accumulation and tax relief, but on a smaller scale per person. A teacher earning $70,000 claiming $8,000 in negative gearing losses saves approximately $1,520 in tax (19% rate), while a lawyer earning $200,000 with the same losses saves $3,600 (45% rate).
Renters receive minimal direct benefits. Despite arguments that negative gearing increases rental supply, renters don't see lower rents and often face increased competition for rentals when markets tighten. The system primarily transfers wealth from taxpayers generally to property investors specifically.
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Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Negative gearing remains one of Australia's most significant property investment incentives, benefiting over 1 million Australians annually while costing taxpayers $12.3 billion in foregone revenue.
As Australia grapples with housing affordability challenges, the debate over who truly benefits from negative gearing continues to intensify, with proposals for reform gaining political momentum as we approach future elections.
It's something we develop in our Australia property pack.
Sources
- Australian Treasury - Negative Gearing
- The Conversation - Property Investors Analysis
- Property Council Australia - ATO Data Analysis
- Grattan Institute - Negative Gearing Analysis
- Wikipedia - Negative Gearing in Australia
- Menzies Research Centre - Negative Gearing Facts
- Parliamentary Budget Office - Cost Analysis
- Western Sydney University - Housing Affordability