Positive gearing
Owning an investment that earns more than it costs to hold, producing surplus cash you pay tax on.
A positively geared property collects more rent than the total of interest, rates, insurance, management and maintenance. The surplus is real income and is added to your taxable income for the year.
Because you are cashflow positive from the start, the investment pays for itself and contributes to your budget rather than draining it. That makes it far less dependent on capital growth to succeed.
The trade-off is that positively geared properties are more often found in regional areas or in lower-growth segments where yields are higher. You are generally choosing income now over capital appreciation later.
A property that pays you
Rent of $32,000 against $27,000 of costs leaves a $5,000 surplus. That $5,000 is added to your taxable income, costing roughly $1,850 in tax at a 37% marginal rate and leaving you $3,150 ahead.
The bit people get wrong
Positive gearing on paper is not always positive in cash. Depreciation is a deduction that costs you nothing in cash, so a property can be cashflow positive while showing a taxable loss — which is often the ideal outcome.
Common questions
Is positive gearing better than negative gearing?
Neither is inherently better. Positive gearing gives you income and resilience; negative gearing bets on growth and suits higher earners with capacity to fund losses. The right choice depends on your income and risk tolerance.
Do I pay more tax on a positively geared property?
Yes, because the surplus is assessable income. But paying tax means you made money, which is a better position than deducting a loss you actually incurred.
How do I find positively geared property?
Look for higher rental yields, typically in regional centres or in units rather than houses. Compare gross yield first, then model the real numbers including all holding costs.
Run your own numbers