Negative gearing is when a property's income doesn't cover its costs. Why the NZ tax treatment changed, and what it means now.
Negative gearing is when the income from an investment property is less than the cost of holding it, including interest — so the owner funds the shortfall from other income.
In Australia, negative gearing is a deliberate tax strategy: the loss reduces tax on your salary. In New Zealand it does not. Since the 2019–20 income year, residential rental losses have been ring-fenced and cannot offset salary or other income.
Any NZ investment case built on "the tax refund will cover the shortfall" is using pre-2019 logic.
A negatively geared property is a cash cost you fund out of pocket, in exchange for expected capital growth. The loss carries forward and is used later — against future rental profit, or against a taxable sale.
Negative gearing isn't automatically bad. A property in a strong growth location may justify a holding cost. The question is whether the growth thesis is sound and whether you can fund the shortfall for years, including through rate rises.
But it's not a tax strategy in New Zealand. If an adviser presents it as one, that advice is out of date.
Last reviewed: 1 August 2026 · General information only, not tax or financial advice.
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