Negative gearing is one of Australia's most discussed property investment strategies. It can allow property investors to claim eligible rental property losses against other taxable income, potentially reducing the amount of tax they pay.

But an important question remains: who benefits most from negative gearing? The answer is not necessarily every property investor equally.

Research has consistently indicated that the benefits of negative gearing are concentrated among higher-income property investors. More recent Australian data also shows that higher-income earners receive a disproportionately large share of tax concessions associated with negative gearing and capital gains.

What Is Negative Gearing?

Negative gearing occurs when the deductible expenses associated with an investment property are greater than the rental income it generates.

Depending on the investor's circumstances and Australian tax rules, that loss may be deductible against other taxable income. You can learn more in our detailed guide to negative gearing in Australia.

However, a tax deduction does not mean the investor receives the entire loss back as a tax refund. The investor still has an underlying investment loss.

Who Benefits Most from Negative Gearing?

The short answer: Higher-income property investors tend to receive a larger share of the benefit from negative gearing.

The Australia Institute's 2018 report, based on NATSEM modelling, found that approximately 49.8% of the benefit of negative gearing went to households in the top 20% by income, compared with approximately 6.2% for households in the bottom 20%.

Benefit of Negative Gearing by Household Income

Source: The Australia Institute, November 2018 (NATSEM modelling). Historical data — not a current 2026 estimate.

Why Do Higher-Income Investors Often Benefit More?

One major reason is the way tax deductions interact with taxable income. If two investors have the same deductible rental loss, the potential tax impact can differ depending on their individual taxable income and circumstances.

Investor A vs Investor B

The two investors may have the same property loss, but the tax outcome can differ because their taxable income and applicable tax rates are different — one reason negative gearing tends to be more valuable to investors with higher taxable incomes.

The tax deduction is only one part of the investment equation. An investor also needs to consider:

• Property purchase price
• Rental income
• Interest costs
• Maintenance and other expenses
• Vacancy periods
• Property growth potential
• Loan structure
• Cash flow
• Capital gains tax
• Selling costs

Does Negative Gearing Mean You Make Money?

Not necessarily. This is one of the biggest misconceptions about negative gearing. A negatively geared property is, by definition, generating a rental loss after relevant expenses.

If that loss produces a tax saving, the investor's after-tax position may improve — but the tax saving does not automatically turn the property into a profitable investment.

What Does the Latest Data Show?

The discussion around who benefits most from negative gearing has continued into 2026. A May 2026 analysis by The Guardian, using Australian government budget data, reported that in 2022–23 the top 10% of income earners received 37% of the benefit of negative gearing. It also reported that the vast majority of the benefits of negative gearing and the capital gains tax concession went to people earning above the median income.

Read The Guardian's 2026 analysis on negative gearing and CGT →

2018 vs 2022–23: Two Different Snapshots

These figures should not be directly compared as though they measure exactly the same thing — different groupings, different years.

Together, they illustrate a broader pattern: negative gearing benefits are not evenly distributed across income groups.

Do Older Property Investors Benefit More?

The original Australia Institute research also examined the distribution of negative gearing benefits by age.

Source: The Australia Institute, 2018. Historical figures, not a current estimate for 2026.

It found that approximately 71% of the benefit went to people aged over 40, compared with around 29% for people aged 40 and under.

One possible reason is that older investors may have had more time to accumulate property assets and may have higher taxable incomes or larger investment portfolios.

Liberal Held Electorates and Negative Gearing

The original Australia Institute report examined the size of negative gearing deductions across electorates. It found that 8 of the top 10 electorates in its 2014–15 data were Liberal-held, with Wentworth ranking first.

Is Negative Gearing Good for Every Property Investor?

No. Negative gearing can be useful in some investment strategies, but it is not automatically suitable for every investor. Before purchasing a negatively geared property, investors should consider whether they can comfortably manage the ongoing cash-flow shortfall.

A tax deduction may reduce the after-tax cost, but you still need sufficient cash flow to meet your loan and property expenses — particularly when:

• Interest rates increase
• Rental income falls
• The property remains vacant
• Unexpected repairs occur
• Property prices decline
• Your personal income changes

Negative Gearing vs Positive Gearing

Neither strategy is automatically better. A positively geared property may generate stronger ongoing cash flow, while a negatively geared property may be considered by some investors where the strategy relies partly on long-term capital growth. The right approach depends on the investor's financial position, goals, risk tolerance and investment strategy.

What About Capital Gains?

Negative gearing is often discussed alongside capital gains because investors may accept an ongoing rental loss in anticipation of potential long-term capital growth. However, capital growth is not guaranteed.

If an investment property increases in value, the investor may eventually realise a capital gain when selling, and capital gains tax can then become relevant. This means investors should look at the complete picture: rental income + tax impact + property expenses + loan costs + potential capital growth + CGT — rather than looking at negative gearing in isolation.

A Simple Example: Sarah's Investment Property

If Sarah is eligible to claim the loss against other taxable income, the deduction may reduce her taxable income — but she has still incurred the underlying $10,000 loss. If the property subsequently increases in value, the potential capital growth may form part of her overall investment return. This is why a property should not be purchased simply because it is negatively geared.

Should You Invest in a Negatively Geared Property?

That depends on your individual circumstances. Before making a decision, consider:

1. Your Borrowing Capacity

Can you comfortably service the investment loan alongside your existing commitments?

2. Your Cash Flow

How much will you need to contribute each month after rental income and expenses?

3. Your Taxable Income

The potential tax impact of a deductible rental loss depends on your individual tax circumstances.

4. Property Fundamentals

Look at location, rental demand, vacancy rates, property type and long-term prospects.

5. Interest Rates

A change in interest rates can significantly affect the cost of holding an investment property.

6. Your Long-Term Strategy

Are you primarily looking for rental income, capital growth, diversification, or a combination?

So, Who Benefits Most from Negative Gearing?

The evidence suggests that higher-income property investors receive a disproportionately large share of the benefits from negative gearing. The Australia Institute's historical 2018 research found that almost half of the benefit went to households in the top 20% by income. More recent data reported in 2026, based on 2022–23 government figures, shows that the top 10% of income earners received 37% of the negative gearing benefit.

But this does not mean negative gearing is automatically a good or bad strategy. For an individual investor, the more important question is:

Negative gearing should be one part of the investment strategy — not the strategy itself.

Frequently Asked Questions