Negative gearing isn't one rule. It's three, and one of them just flipped twice.
- Australia: interest fully deductible, losses offset any income including salary.
- New Zealand (from April 2025): interest fully deductible again, but losses are ring-fenced to rental income only — they can't offset salary.
- United Kingdom: Section 24 replaced full deductibility with a flat 20% tax credit, regardless of your tax bracket.
- New Zealand's rules changed twice in five years. Always check the current rule, not the one you learned it under.
“Negative gearing” gets used as if it’s one universal concept. Run the same $15,000 annual interest bill through Australia, New Zealand and the UK’s actual rules, and you get three different after-tax outcomes.
Australia: full deduction, losses offset other income
Mortgage interest is fully deductible against rental income in Australia. If the property runs at a loss overall, that loss can offset other income, salary included, which is what most people mean when they say “negative gearing.”
At a 37% marginal tax rate, a $15,000 interest bill saves $5,550 in tax. Hold the property more than 12 months and any eventual capital gain also gets a 50% CGT discount for individuals. The interest deduction and the loss offset are two separate mechanisms, but together they’re the most generous of the three regimes.
New Zealand: 0%, then 100% again, in five years
New Zealand phased interest deductibility down to 0% between 2021 and 2025, a policy shift that meant investors couldn’t deduct mortgage interest against rental income at all for several years, full stop.
From 1 April 2025, full deductibility was restored. Interest is once again 100% deductible against rental income. The catch: losses are ring-fenced to rental income only. If the property runs at a loss, that loss can’t offset your salary the way it can in Australia, it carries forward against future rental profits instead.
So if the property is profitable, the current NZ rule now behaves like Australia’s. If it’s running at a loss, the tax benefit is deferred rather than usable this year. And an investor who built a five-year model in 2021 assuming 0% deductibility forever would have been just as wrong as one who assumed 100% forever, this rule has genuinely moved twice in one policy cycle.
United Kingdom: a credit, not a deduction
Section 24, fully phased in since April 2020, replaced full interest deductibility with a 20% tax credit on finance costs. This is a materially different mechanism, not just a lower rate.
Run the same $15,000 interest bill through it: instead of a deduction that scales with your marginal rate, you get a flat 20% credit, $3,000, regardless of what tax bracket you’re in. A higher-rate taxpayer at 40 to 45% who would have received $6,000 to $6,750 under a full deduction gets $3,000 instead, a real gap that widens the higher your other income is.
The comparison that actually matters
| Interest treatment | Loss offset | |
|---|---|---|
| Australia | Fully deductible | Offsets any income |
| New Zealand (from Apr 2025) | Fully deductible | Ring-fenced to rental income only |
| United Kingdom | 20% tax credit only | N/A, credit is flat regardless of loss |
Three genuinely different systems sitting under one shared phrase. If you’re modelling after-tax cashflow across more than one of these markets, the assumptions behind each property need to reflect the actual rules for that market — a single shared model gets the numbers wrong for at least two of them. And if your portfolio is entirely in one country, New Zealand’s back-and-forth over the past five years is the reminder that it’s worth checking the current rule rather than the one you learned it under.