A positively geared property earns more rent than it costs to hold. For a Gold Coast investor, the loan structure you choose decides whether that surplus is real or only looks good on paper.
The mistakes tend to sit in three places: how the lender counts your rent, how you set up repayments, and how you treat tax. Each one is covered below.
What Is a Positively Geared Investment Property?
A positively geared property is one where rental income is higher than the loan interest and other holding costs, leaving you with a surplus. The surplus is generally treated as taxable income, so speak with your accountant about how it affects your return.
Holding costs include interest, council rates, insurance, property management fees and repairs. Interest on money borrowed to buy or hold a rental property is deductible to the extent the property is rented or available for rent. Only the interest part of a principal and interest repayment counts. The principal part is repaying the loan and is not deductible.
This matters because a loan can look cash flow positive when you compare rent to total repayments, yet the tax picture is different. Repayments and deductible interest are not the same number.
How Do Lenders Count Rental Income on an Investment Loan Application?
Banks regulated by APRA generally count no more than 80 per cent of expected rent, because APRA's view is that lenders should allow at least a 20 per cent haircut for periods without a tenant. That haircut is about vacancy only. Management fees and repairs are separate costs.
Lenders also tend to place less weight on a rental appraisal than on actual rent received. Which evidence a lender accepts for a new purchase is set by each lender, so it is worth checking before you apply.
The practical point: do not plan your borrowing around the full rent figure. Assume the lender will count less, and check how your borrowing capacity looks on that basis.
Should You Choose Interest Only or Principal and Interest?
Interest only keeps repayments lower during the interest-only period, but it does not increase how much you can borrow. Principal and interest builds equity through repayments but costs more each month.
When a lender assesses an interest-only loan, APRA expects it to test repayments as principal and interest over the remaining term after the interest-only period ends. A 30-year loan with a 5-year interest-only period is tested over 25 years. So the interest-only feature gives you a lower maximum loan size than an equivalent principal and interest loan, not a higher one.
As an illustration only, using a rate of 6.75% p.a., consider a loan of $500,000. Interest-only repayments would be about $2,813 a month ($500,000 x 6.75% / 12). Principal and interest over 30 years at the same rate would be about $3,243 a month. If the loan switched to principal and interest after five years, the repayment over the remaining 25 years would be about $3,455 a month. This example is not a quote, and a calculator will give you figures for your own loan.
The trade-off is that the balance does not fall during the interest-only period, and the repayment rises when it ends. Lenders also set their own interest-only terms and rates, so these vary.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at Mi Finance Broker today.
Do Not Let a Redraw or Equity Release Dent Your Deductions
Interest is deductible based on what the borrowed money is used for, so using investment loan funds for personal spending makes that part of the interest non-deductible. The ATO applies this under Taxation Ruling TR 2000/2, and it covers redraws and line of credit drawdowns.
Consider an investor with a positively geared unit who redraws extra repayments to fund a holiday. That redraw is treated as a separate borrowing for a private purpose. The interest on that portion is not deductible, and the investor now has to split the loan interest when preparing the tax return. A better path is to keep investment and personal borrowing in separate loan accounts from the start, so the purpose of each is clear. Their accountant can then claim the right amount with less guesswork. The cost of this approach is a more structured loan setup, which may mean multiple accounts and fees depending on the lender.
Offset accounts work differently. An offset reduces the balance interest is charged on, so interest incurred, and therefore deductible interest, is lower. The loan balance and purpose stay the same. Confirm with your accountant how withdrawals from an offset are treated.
Is Positive Gearing Still Worth Considering After the 2026 Tax Changes?
Positive gearing is not affected by the new negative gearing limits, because those rules only change how a net rental loss can be used. They do not change deductible interest.
For established residential properties bought after 7:30pm AEST on 12 May 2026, net rental losses from the 2027-28 income year can only be deducted against other residential property income. Properties held at that time keep the current treatment until sold, and eligible new builds can still deduct losses against all income.
Capital gains rules also change from 1 July 2027. The 50 per cent discount is replaced by cost base indexation and a 30 per cent minimum tax rate on gains accruing from that date. Gains before that date are taxed under the current rules. A positively geared property still needs a sound loan structure, but your accountant should model the tax result before you buy or sell.
What Should You Compare Before Applying for an Investment Loan?
Compare the rate, the fees, the repayment type, the offset and redraw features, and how the lender treats rent. These matter more than the headline rate alone.
The discount a lender offers, and how its features work, differ between lenders, so a single bank's view is limited. If you already own property, a loan health check can show whether your current structure still suits a positively geared plan, and refinancing is worth a look if it does not. You can also read about investment loans before you apply.
Loans above 80 per cent of the property's value generally need Lenders Mortgage Insurance, which the borrower pays. Lenders set their own limits, so a larger loan is not always available. SMSFs are treated differently. Since 10 August 2026, a new SMSF limited recourse borrowing arrangement can only be used to buy business real property, so it generally cannot be used to finance a residential rental. Get specialist advice before considering SMSF borrowing. See SMSF loans for more.
Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
What is a positively geared property?
It is a property where rental income is higher than the loan interest and holding costs. The surplus is generally treated as taxable income, so check with your accountant.
How much rent do lenders count on an investment loan?
APRA's view is that banks should count no more than 80 per cent of expected rent. Each lender sets its own rules on the evidence it accepts.
Does interest only increase how much I can borrow?
No. Lenders assess interest-only loans on principal and interest repayments over the remaining term, so the maximum loan size is lower than for an equivalent principal and interest loan.
Does using a redraw affect my tax deduction?
It can. Interest is deductible based on how the borrowed funds are used, so a redraw for personal spending is not deductible. Ask your accountant how it applies to you.
