If you mortgage for the purpose of having the investment property in your name then all expenses relating to the mortgage are tax-deductible.
If all the outgoings (mortgage interest, council rates, water rates, building insurance, etc) are greater then the income (rent) received for the property then you are negative gearing.
In relation to deduct ability of the interest of a mortgage the income tax assessment act says it is the intention of the mortgage that will determine whether you can deduct the interest.
If you borrow the money so that you can improve the house that you live in and register that mortgage on the house you rent out, the interest is not deductible.
You need to look at the purpose for the loan. If the purpose is to be able to earn an income through rent then it is deductible.
I hope this is a little clearer.
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