So, what is negative gearing?
If you buy a house that makes more money (in rent) than it costs (in repayments and expenses), then you can say it's 'positively geared'. So your mortgage is paying itself off.
But if the rent doesn't cover the costs, then you can claim that loss on tax (negative gearing). In the 2012-13 tax year, the average loss on an investment property for negatively geared investors was about $10,000.
You can reduce the amount you can be taxed by $10,000. So if you're earning $90,000 per year, the amount you pay tax on is $80,000.
There's quite alot more to it from a taxation point of view including if you pay more than interest on the loan (so some of the principle loan) this can't be claimed. We also have some clients that are a little surprised as they have been paying off as much as they can on their loan.