Can Doctors Use Negative Gearing to Reduce Tax?
- Angelina Anderson
- 3 days ago
- 4 min read
Doctors and medical practice owners are often taxed at the highest rates in Australia, which is why strategies to legitimately reduce tax are always in demand. One of the most common questions we hear is whether negative gearing can help.
The short answer: yes, it can. But as with all tax strategies, the detail matters.
What is Negative Gearing?
Negative gearing happens when the cost of owning an income-producing asset is greater than the income it generates. The resulting loss can be used to offset other taxable income, such as practice profits or salary.
A simple example is an investment property. If the rent received is less than the interest, maintenance, and running costs, the shortfall can be deducted from your taxable income, reducing your tax bill.
Property Investments for Doctors
For many medical professionals, property remains the most familiar way to use negative gearing. A practice owner might hold residential or commercial property, and if those properties generate a loss, that loss can offset income earned through their practice.
It’s important to remember that while tax savings can be valuable, the property must be a genuine long-term investment. The ATO is quick to scrutinise arrangements that appear to be designed purely for tax benefits without a commercial purpose.
Beyond Property: Negative Gearing in Your Practice
Negative gearing isn’t limited to real estate. It can also apply within your medical practice itself:
Medical equipment finance: If you purchase new equipment under finance, the interest and depreciation costs may outweigh the immediate income it generates in the early years.
Practice fit-outs and refurbishments: Loans taken out for a new clinic or expansion can result in upfront costs that exceed income for a period of time.
Other investments: Managed funds, shares, or other income-producing assets may also generate deductible losses if expenses or financing costs outweigh returns.
These losses can be offset against your broader taxable income, reducing your overall tax liability.
The Catch: Documentation and Genuine Purpose
For any negative gearing strategy to stand up under ATO scrutiny, three things are essential:
Commercial intent: The investment must be expected to generate income over time, not just deliver tax savings.
Accurate records: All expenses and financing costs must be properly documented.
Broader strategy: Negative gearing should support your overall wealth and business goals, not be the sole reason for entering into an investment.
Is Negative Gearing Right for You?
Negative gearing can be a powerful tool for medical practice owners, but it comes with risks. Relying solely on tax savings without a broader investment or practice growth plan can leave you exposed. The right approach is to consider how negative gearing fits within your bigger picture: growing your practice, protecting your assets, and building long-term wealth.
Example: How a Doctor Can Use Negative Gearing to Reduce Tax
Dr Sarah runs a successful private practice in Sydney and earns $380,000 a year. Because she is taxed at the top marginal tax rate of 45% plus Medicare levy, she is keen to find ways to reduce her taxable income.
Sarah decides to purchase an investment property for $1.2 million. The rental income is $800 per week ($41,600 per year), but the costs of holding the property are higher:
Interest on the investment loan: $60,000
Council rates, insurance, and maintenance: $10,000
Depreciation and other costs: $7,000
Total annual expenses: $77,000Rental income: $41,600Net rental loss: $35,400
That $35,400 loss is classed as a negatively geared amount. Sarah can offset this loss against her practice income, reducing her taxable income from $380,000 to $344,600.
At a 45% marginal tax rate, this saves her around $15,930 in tax for that year.
Sarah understands, however, that the strategy isn’t just about tax savings. The property is in a growth area, and over the long term she expects capital gains to outweigh the short-term losses. She also keeps detailed records of all expenses to ensure the ATO can clearly see the commercial intent of her investment.
Example 2: Negative Gearing through Practice Equipment Finance
Dr James, a radiologist, expands his practice and finances a new MRI machine costing $1.5 million. The machine is financed through a loan, and in the first year his costs look like this:
Loan interest and repayments: $120,000
Depreciation (deduction under ATO rules): $90,000
Service and maintenance: $30,000
Total expenses: $240,000Income generated by the MRI in year one: $150,000Net loss: $90,000
That $90,000 shortfall is negatively geared. Dr James offsets it against his practice income, immediately reducing his taxable income for the year.
At the top marginal rate (45% plus Medicare levy), this saves him around $41,000 in tax. Over time, as the MRI attracts more referrals, the income will exceed costs, but the early years of losses help with cash flow and tax planning.
Example 3: Regional GP Using Negative Gearing and Zone Tax Offset
Dr Priya relocates to a regional town in Queensland, earning $220,000 as a GP. She decides to invest in a rental property in the same area to build long-term wealth.
Her rental income is $18,000 a year, but her loan interest and expenses total $28,000.
Net rental loss: $10,000
Dr Priya offsets this loss against her taxable income, reducing her tax bill by about $4,500.
Because she is based in a regional area, she also qualifies for the zone tax offset, worth an additional $1,173 (2025 rates).
In total, Dr Priya reduces her tax by around $5,673, while building long-term equity in the property.
Why These Examples Matter
These case studies highlight how negative gearing is not one-size-fits-all:
For specialists in private practice, equipment finance can create early-year tax relief.
For regional doctors, combining negative gearing with offsets amplifies the benefit.
For high-income surgeons or dentists, property remains the most common strategy.
Final Thoughts
Yes, doctors and practice owners can use negative gearing to reduce tax. Whether through property, equipment finance, or practice fit-outs, the strategy can deliver meaningful savings when used correctly. But it’s not a one-size-fits-all solution.
At Dolman Bateman, we work with doctors, dentists, and surgeons every day to design tax strategies that balance immediate benefits with long-term goals. If you’re considering using negative gearing as part of your practice or investment plan, speak to us before you commit, the right advice now can make all the difference later.
Disclaimer:
The information in this video is general in nature and does not take into account your personal circumstances. You should seek independent advice from a registered tax professional before acting on any information provided.
