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Negative Gearing for Doctors & Medical Professionals

How Negative Gearing Works

By definition, negative gearing is where you borrow to acquire an income producing asset and the interest and other tax deductible costs you incur exceed the income you receive from the investment.

Negative Gearing isn't suitable for all investors and the tax benefits should not be the only reason for the property purchase. Although it can lower your tax liability, the tax implications will depend on your personal situation and the type of investment you choose.  As the description implies, negative gearing means a negative cashflow that you need to fund from other income sources.

Creating wealth through purchasing an investment property is a well established practice in this country, however, negative gearing can also apply to other types of income producing investments such as shares and managed funds. The attraction of borrowing or ‘gearing' is that you can invest in shares or property that might otherwise have been unaffordable.  For individuals, the loss can also be offset against other assessable income and the tax benefit will depend on your marginal tax rate.

The real benefits of negative gearing are only realized when you combine the correct tax and financial advice with a property in the right location funded by the most suitable loan product. You should always seek expert professional advice to make sure the purchase is within your budget and will provide long term taxation and financial benefits.

Recent Changes to Negative Gearing

The Federal Government has introduced significant changes to negative gearing and capital gains tax, with the aim of encouraging investment into new housing rather than existing homes. The key changes take effect from 1 July 2027, but they only affect certain properties.  

Existing properties are grandfathered

If you owned an investment property before 7:30 pm (AEST) on 12 May 2026 (Budget night), nothing changes. You can continue to: Claim negative gearing. Offset rental losses against your salary or other income. Continue under the existing rules, even after 1 July 2027.  

New builds can still be negatively geared

If you purchase a new residential property (or build one), you can still: Offset rental losses against your other taxable income.Continue to access negative gearing after 1 July 2027.  

Established residential properties

If you purchase an established residential property after 7:30 pm on 12 May 2026, from 1 July 2027 you can no longer offset rental losses against your salary or business income. Instead: Rental losses are quarantined. They can only be used against: future net rental income from residential properties; or future capital gains on residential property.  

Suppose you’re a specialist doctor earning $500,000 per year. You buy an established investment property after Budget night. Annual figures: Rental income: $35,000. Interest and expenses: $50,000. Rental loss: $15,000 Under the old rules: You could deduct the $15,000 against your salary.At a 47% marginal tax rate, you’d receive approximately $7,050 in tax savings. Under the new rules: You cannot deduct the $15,000 against your salary. The $15,000 is carried forward and can only offset future residential rental income or a future capital gain on residential property.  

What hasn’t changed?

The reforms do not affect: Commercial property. Shares. Managed funds , Most other investment assets.
The negative gearing changes are targeted at residential property.  

What does this mean for high-income professionals?

For doctors, dentists and other high-income earners, the reforms make new residential property relatively more attractive than established residential property if negative gearing is an important part of the investment strategy. However, we recognise the fact that as an investor you are usually paying a premium to the developer, which makes the deal not as attractive,  Some investors are also reassessing commercial property and diversified investment portfolios such shares in light of the changes.  

Common Mistakes Doctors Make

If you negatively gear property, you need to understand some important points:

• Investing in property is usually a medium to long term investment and requires planning. Extra caution must be exercised when a property is projected to generate a negative cash flow for a number of years.
• Properties are expected to generate profits only through Capital Gains and there is no guarantee that the value of the property will appreciate enough during the holding period to cover your losses.
• You have to remember that the family home is a purchase from the heart while an investment property needs to be a purchase from the head. You've heard the old saying that the three most important things when buying a property are: ‘location, location, location' and this is even more important when buying an investment property.

How a Specialist Medical Accountant Can Help

The real benefits of negative gearing are only realised when you combine the correct tax and financial advice with the right property and loan product. You should always seek expert advice to make sure the purchase is within your budget and will provide taxation and financial benefits in the long run.

• Evaluate the tax consequences - Using an intelligent software tool we can prepare a 10 year cash flow analysis of the proposed property, taxable income forecasts and equity projections. This ‘what if' analysis lets us quantify the financial impact of changes in key variables such as rental income or mortgage interest rates.
• Where to buy -  we are able to help you locate the right property in the right location with a view to maximizing the capital gain on sale.
• Help you correctly structure your loan for taxation purposes.
• The tax loss on the property can pose a major cashflow issue, however, we can prepare an application to vary your PAYG tax withholding so that your annual tax deductible loss is reflected in your regular pay packet.

If you're looking to accelerate your financial success we invite you to book a free, one hour introductory consultation to discuss how negative gearing might apply to your situation. You'll get practical financial strategies designed to help you build your wealth and minimise your tax. To book a time complete your details on the top right of this page and we'll be in touch.

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