It is simply an Financial Investment Loss. You report this in your tax return. The ATO doesn't state it in the terms you are asking "Negative Gearing is allowed". It allows you to calculate your loss from financial investments (separate from Capital Gains Loss) and this loss is deducted from your other income. If your only investments are shares, for example, and you have a Financial Investment Loss, that loss can be deducted from your other income. That means those shares were negatively geared.
Check this out:
https://www.ato.gov.au/Individuals/...t-financial-investment-loss-2017/?=redirected
If you look at worksheet 1a and you only have shares, then you may have amounts for items a, b and c (which will be totalled at item j).
If you look at table 1b, then if you have borrowed to buy the above shares you will have an amount at item k (loan interest).
If k is the only item and k is bigger than j, when you work through that table, you will have a negative value for item r.
A negative value here means your shares are negatively geared and you can claim that against other income.
Your income from dividends is less than the interest you pay on the moneys you borrowed to buy those shares. Exactly the same as your rental income being less than the expenses applicable to owning a rental property.
