Negative gearing is a tax strategy used in Australia where an asset owner can claim a tax deduction if their expenses exceed their income. This process is allowed under the Australian income tax system, which has a single income tax schedule for all sources of income. Specifically, negative gearing deals with the laws surrounding net losses on investments and occurs when rental property expenses outweigh the income it generates. This results in a taxable loss that can be offset against other income. This tactic involves intentionally making a loss on a rental property in order to deduct expenses and interest from tax returns. The property is considered negatively geared if it is purchased using borrowed funds and the rental income does not cover the expenses. The main benefit of negative gearing is reduced rental costs and attracting potential buyers due to the tax benefits.