Negative Gearing Calculator
Calculate the tax benefit of negative gearing an investment property. Includes depreciation and all deductible expenses.
Disclaimer
This calculator provides estimates for general information purposes only. Results should not be relied upon as professional financial, tax, or legal advice. Tax rates and thresholds are based on publicly available ATO data and may change. Always consult a qualified tax agent or financial adviser for advice specific to your circumstances.
Frequently Asked Questions
What is negative gearing in Australia?
Is negative gearing worth it?
What is Negative Gearing?
Negative gearing occurs when the costs of owning an investment property — including loan interest, management fees, and depreciation — exceed the rental income, creating a tax-deductible loss.
How this calculator works
This calculator totals all your deductible property expenses (interest, management fees, council rates, insurance, maintenance, and depreciation) and subtracts them from your annual rental income. If the result is negative (a loss), it calculates the tax benefit at your marginal rate — for example, a $10,000 loss at a 37% marginal rate saves $3,700 in tax. The after-tax weekly cost shows your real out-of-pocket cost of holding the property after the tax benefit is applied.
How Negative Gearing Works in Australia
Negative gearing occurs when the total costs of owning an investment property exceed the rental income it generates, creating a net rental loss. Under Australian tax law, this loss can be deducted from your other income (such as your salary), reducing your overall taxable income and therefore your tax. The tax benefit equals the net rental loss multiplied by your marginal tax rate.
What Expenses Are Tax-Deductible?
- Loan interest — typically the largest deduction for negatively geared properties
- Council rates and water charges
- Landlord insurance and building insurance
- Property management fees (usually 5-10% of rent)
- Repairs and maintenance (but not initial improvements)
- Depreciation on the building (capital works at 2.5% per year for properties built after 1987)
- Depreciation on fixtures and fittings (carpets, appliances, blinds) — Division 40 assets
- Body corporate fees (for apartments and townhouses)
- Land tax
- Pest control, cleaning, and gardening for the property
Cash Loss vs Tax Loss
Your actual cash loss is the difference between the rent you receive and the cash expenses you pay out of pocket (interest, rates, insurance, repairs, management fees). Your tax loss may be larger because it includes non-cash deductions like depreciation — you can claim the decline in value of the building and fixtures without spending any money. This means a property can be cash-flow neutral or even positive while still generating a tax loss through depreciation.
Capital Gains When You Sell
While negative gearing provides annual tax deductions, you will pay Capital Gains Tax (CGT) when you eventually sell the property for a profit. The capital gain is the sale price minus the original purchase price and certain costs. If you hold the property for more than 12 months, you receive a 50% CGT discount — only half the gain is added to your taxable income. Note that depreciation claimed on the building (Division 43) can reduce your cost base, potentially increasing the capital gain on sale.
Tax Benefit of a $10,000 Rental Loss at Each Marginal Rate
| $18,201 - $45,000 (16% rate) | $1,600 tax saving |
| $45,001 - $135,000 (30% rate) | $3,000 tax saving |
| $135,001 - $190,000 (37% rate) | $3,700 tax saving |
| $190,001 and above (45% rate) | $4,500 tax saving |
Higher income earners receive a larger tax benefit from the same rental loss, which is why negative gearing is most commonly used by taxpayers in the 37% and 45% brackets. Medicare levy (2%) effectively increases the benefit slightly.
Worked Examples
Rental income $25,000/year, total expenses $35,000/year, marginal tax rate 37%
Tax saving: $3,700 per year
- Annual rental income: $25,000
- Total deductible expenses: $35,000 (interest $22,000 + rates $3,000 + insurance $1,500 + management $2,500 + depreciation $4,000 + maintenance $2,000)
- Net rental loss: $25,000 - $35,000 = -$10,000
- Tax benefit at 37% marginal rate: $10,000 x 37% = $3,700
- After-tax cost of holding the property: $10,000 - $3,700 = $6,300 per year ($121/week)
- Note: $4,000 of the loss is from depreciation (non-cash), so actual cash out-of-pocket is only $6,000 - $3,700 = $2,300/year
All calculations are performed in your browser — your data never leaves your device. Results are for general guidance only and should not be considered professional financial advice.
Built and maintained by Konstantin Iakovlev. Data sourced from the ATO and official Australian government sources.