Positive Gearing
Tax & Deductions
When an investment property's rental income exceeds all ownership costs, producing a net profit.
Full Explanation
A positively geared property puts money in your pocket each period because the rent covers the mortgage, fees and maintenance with surplus left over. The profit is added to your taxable income and taxed at your marginal rate. Many investors aim to transition from negative to positive gearing over time as rents rise and loans are paid down.
Example
Your unit collects $30,000 rent per year while total expenses are $22,000, leaving a $8,000 taxable profit.
Frequently Asked Questions
Do I pay tax on a positively geared property?
Yes. The net rental profit is added to your assessable income and taxed at your marginal tax rate. You must declare it in your ATO tax return.
Is positive gearing better than negative gearing?
Neither is inherently better. Positive gearing provides immediate cash flow, while negative gearing can reduce tax and may deliver stronger capital growth. The right strategy depends on your income, goals and risk tolerance.