Written by

Steven Lee

Mortgage Director, ODIN Mortgage & Tax

10+ years in Australian banking and mortgage lending

Last reviewed

Updated on: June 10, 2026 View profile →

What Is Negative Gearing and Why Does It Matter for Expats?

Negative gearing occurs when the expenses of owning an investment property exceed the income it generates. According to the Australian Treasury, it describes a situation “where expenses associated with an asset (including interest expenses) are greater than the income generated by that asset.”

For Australian expats, this matters because:

• You are likely borrowing to fund an Australian investment property while earning overseas income
• Your loan interest (often the largest deductible expense) may represent a significant annual cost
• A well-structured negative gearing position can legally reduce your Australian tax liability, both now and when you return to Australia

The strategy is widely used. Analysis published by The Guardian in 2026 found that capital gains discount rules and negative gearing have meaningfully shaped investment behaviour in the Australian property market, highlighting just how central these tax provisions are to how Australians approach property investment.

Can Australian Expats Actually Use Negative Gearing?

Yes. According to Runway Wealth, “the short answer is yes, negative gearing as an Australian expat can still work. Despite living overseas, you can still access the benefits of negative gearing.”

However, the mechanics depend heavily on your Australian tax residency status:

The critical insight: even if you are a non-resident for tax purposes, you are still subject to Australian tax on Australian-sourced income such as rental income. This means the deductions still exist and still apply against that income pool. Losses that cannot be used immediately are carried forward and applied in future years.

As Atlas Wealth notes, “Australian expats who are non-resident for tax purposes can negatively gear their investment property… you can utilise tax losses to offset against future Australian income.”

What Expenses Can Expats Claim on a Non-Resident Investment Property in Australia?

Non-resident property tax Australia rules allow a broad range of deductions on rental properties. According to The Property Accountant’s 2026 guide, deductible expenses typically include:

• Loan interest: The largest deduction for most investors. This is why loan structure matters so much.
• Property management fees
• Council rates and strata levies
• Landlord insurance
• Repairs and maintenance (not capital improvements)
• Depreciation on the building (Division 43) and fixtures (Division 40)
• Accounting and tax agent fees related to the property

What you cannot claim:

• Capital expenditure (improvements that increase the property’s value must be depreciated, not immediately deducted)
• Expenses relating to periods the property was not available for rent
• Private use portions if the property is used personally at any time

How Does Loan Structure Affect Your Negative Gearing Position?

This is where most expats leave money on the table. Loan structure is not just a lending decision – it is a tax decision. The two interact directly.

Key structural considerations:

• Interest-only vs. principal and interest: Interest-only loans maximise the deductible interest component, which can increase the paper loss on the property. Whether this suits your situation depends on your goals and borrowing capacity.
• Offset accounts: Funds sitting in an offset account reduce the interest charged but also reduce the deductible interest. There is a trade-off between cash flow and tax optimisation.
• Loan purpose: Borrowings must be directly tied to the income-producing property. Mixing loan purposes (e.g., redrawing equity for personal use) can compromise the deductibility of interest.
• Entity structure: Owning the property in your personal name versus a trust or company affects how losses are treated and what future flexibility you have.

This is exactly why ODIN Mortgage coordinates mortgage structuring with the tax team at Odin Tax from day one. When a client is purchasing a non-resident investment property in Australia, the loan structure, ownership structure, and tax position are considered together, not separately.

What Are the Risks of Getting This Wrong?

Negative gearing for expats involves several genuine risks that are worth stating plainly:

• ATO audit exposure: Incorrectly claiming deductions (e.g., on mixed-use properties, or claiming capital expenditure as repairs) can trigger ATO scrutiny.
• Non-resident withholding tax: Rental income paid to non-residents may be subject to withholding tax obligations if managed through certain channels.
• Foreign tax interactions: Depending on your country of residence, Australian investment income may need to be declared there too. Double tax agreements between Australia and countries like the UK, USA, Singapore, and UAE affect how income is taxed in each jurisdiction.
• Policy risk: As Ausfirst Lending Group notes, negative gearing policy in Australia has been subject to ongoing political debate. Any future legislative change could affect the strategy’s long-term value.

Frequently Asked Questions

Ready to structure your Australian investment properly from overseas? Visit www.odinmortgage.com to speak with a specialist who understands both the lending and the tax side of negative gearing as an expat.

This article contains general information only and does not constitute personal credit advice or tax advice. Borrowing power, loan structure outcomes, and tax treatment depend on individual circumstances, lender policy, and your specific Australian tax residency status. Lender policies are subject to change. Please consult a qualified mortgage broker and registered tax agent for advice relevant to your situation.

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