Atlas Broker
Key point: Since the Government changed the negative gearing rules in the recent Budget, lenders have started developing neutral gearing policies that may help restore investor borrowing capacity where the property is genuinely self-supporting.
For decades, negative gearing has been one of the most common strategies used by Australian property investors. The ability to offset investment property losses against personal income helped support both cash flow and borrowing capacity, allowing many investors to grow their portfolios over time.
However, since the Government changed the negative gearing rules in the recent Budget, many investors are now reassessing their strategy. The key concern is not just the tax outcome. For many investors, the bigger issue is the impact on borrowing capacity.
At Atlas Broker, we are now seeing lenders respond by introducing neutral gearing lending policies designed to help address this problem.
How neutral gearing policies work
We are now seeing lenders introduce policies that recognise when a property is effectively self-supporting.
Where a property is neutrally geared, meaning the property income and allowable expenses (excluding interest) broadly balance out, some lenders may:
- Exclude the investment interest expense from servicing calculations.
- Avoid applying the same rental income sensitisation used under previous policies.
- Treat the investment property as largely neutral from a servicing perspective.
The practical benefit is significant. For many investors, their borrowing capacity can return to a position more similar to what was previously achievable under negative gearing arrangements.
This starts to solve one of the biggest problems created by the recent rule changes: reduced borrowing capacity.
What this means in practice
Meet James
James is a fictional example, but his situation is common.
He earns a strong income, owns his home, and has built substantial equity. He wants to purchase an investment property, but following the recent changes to negative gearing, he is concerned that his future borrowing capacity will be reduced.
Under a neutral gearing policy, the lender recognises that the property’s income and expenses broadly offset each other. If the policy applies, the interest cost is excluded from servicing, and the rental income is not sensitised in the same way as under previous policies.
The result is simple:
- The investment loan has less impact on his borrowing capacity.
- James retains more flexibility for future investments.
- He can focus on whether the property is the right long-term asset.
- The conversation shifts from “Can I borrow enough?” to “What is the right property to buy?”
After that, it is about finding the right property
A lending policy does not create wealth on its own. It creates opportunity.
Once borrowing capacity is improved, investors still need to focus on the fundamentals:
- Strong location fundamentals.
- Sustainable rental demand.
- Population and employment growth.
- Infrastructure investment.
- Long-term capital growth potential.
- A property that can be held comfortably through different market cycles.
The Atlas Broker view
The recent Budget changes to negative gearing have created uncertainty for property investors. The key challenge for many clients is reduced borrowing capacity, not simply the tax outcome.
Neutral gearing policies are a practical response from lenders. By recognising when an investment property is genuinely self-supporting, these policies may help restore borrowing capacity to a level closer to what investors previously achieved under negative gearing arrangements.
From there, the strategy becomes clear: secure the right finance structure, then find the right property.
To find out more speak to Richie Ballard on 0408 605 930 or email him at rballard@atlasbroker.com.au .
| At Atlas Broker, we help investors understand how evolving lending policies can support their long-term property strategy, while keeping the focus where it belongs: borrowing capacity, cash flow, and quality asset selection. |
