Australia
In Australia, negative gearing often refers to borrowing for a residential property investment (e.g. a house or unit), which is made available for rent. In most cases rental values are less than the interest on property value, and the investment thus results negative gearing if the investor borrows a large proportion of the purchase price.
Borrowing to purchase shares whose dividends fall short of interest costs is also called negative gearing. A common type of loan to finance such a transaction is called a margin loan. Importantly the tax treatment is the same, and any investment made where the funding costs exceed the income return is referred to as negative gearing.
Negative gearing by property investors reduced personal income tax revenue in Australia by $600 million in the 2001-02 tax year and $3.9 billion in 2004-05.
Read more about this topic: Negative Gearing (Australia)
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