You should be able to claim the interest part of the loan, not the out of pocket difference.

What I meant was that negative gearing is when you are out of pocket from your investment property, whereas positive gearing is when you are getting a positive cash flow and actually taking home money which you would then pay tax on.

Paul Clitheroe's book "Making Money" has an excellent calculation for working out your gearing/cash flow for an investment property. I did it all up in an Excel spreadsheet a while back. It's on my old laptop, I'll see if I can hunt it down for you.

If you can find that out for me too that would be awesome, we have a rental which I think I will need to sell before we have No'2 and I am curious as to whether we can afford to keep it, or just cash up a bit to do a few more things to the new house and have bubs and be able to take some time off without the big stress of the two mortgages