Positive Vs Negative Gearing

Positive VS negative gearing

1) Positive gearing is where you borrow money to invest and the income from the investment (for example, rent or dividends) is more than the cost of the investment (interest and other expenses). If you're positively geared, you'll have extra money coming in. But you'll also have to pay tax on this income at tax time.

2) Negative gearing is where you borrow to invest, and the investment income is less than the cost of the investment. Investors negatively gear as they can generally claim a tax deduction for the investment loss. The aim is for the capital growth to offset the loss in earlier years. If you're making an investment loss, it is still costing you money. You will need to have cash from other sources, like your salary, to cover interest and expenses.