Negative gearing has existed in Australia since at least the 1930s, when it first appeared in the Income Tax Assessment Act 1936. Over the years various governments have attempted to abolish it, but each time the backlash was swift and severe from voters and it remains in place today.

Australia is one of the few countries in the world to have a negative gear system. Many critics argue that the negative gearing as tax relief drove up prices, although its impact on housing affordability is disputed by some. Others say supply and demand are a bigger driver.

“There’s an argument to suggest that negative gearing lowers rental prices, because an investor might think, ‘Well, at least I’m negatively geared – I’m getting a tax deduction, so I won’t increase the my tenant’s rent,” says Michael Sauer, Certified Financial Planner and Advisor at Endorphin Wealth Management.

“However, investors from other countries do not benefit from the ‘free lunch’ that is negative gearing.”

And those who can’t stand negative gearing see the situation very differently, as he explains.

“We have seen over the past 12 months, as inflation and interest rates have risen rapidly, that landlords have been very happy to raise rents. So I’m not sure the argument that it protects tenants holds water.

Related: Guide to real estate investing in Australia