Negative Gearing Calculator for Australian Investors
Work out exactly what a negatively geared investment property costs you after tax. Enter your rent, loan interest, expenses, depreciation and marginal tax rate, and this free calculator shows your annual rental loss, the tax it saves you, and your true out-of-pocket cost each week.
It is built around Australian rules, so the deductions and tax rates match the way the ATO actually treats a rental property.
Your numbers
Annual rent $28,600
Interest only, not principal repayments.
Rates, insurance, management, maintenance.
From a quantity surveyor's depreciation schedule.
Out of pocket per year, after tax
Negatively geared$10,332
About $199 a week once the tax saving is counted.
Rental loss before tax
-$16,400
Income minus all deductions
Tax saving at 37%
$6,068
Loss offset against other income
Weekly out of pocket
$198.69
After the tax saving
Total deductions
$45,000
Interest, expenses, depreciation
How the negative gearing calculator works
- 1
Enter your weekly rent
Put in the rent you receive each week. The calculator annualises it to your gross rental income for the year.
- 2
Add your annual loan interest
Use the interest portion of your repayments only, not the principal. Interest is deductible; paying down the loan balance is not.
- 3
Add your annual expenses
Council and water rates, landlord insurance, property management fees, strata, and repairs and maintenance are all deductible holding costs.
- 4
Add your annual depreciation
This is a non-cash deduction for the building and fixtures, taken from a quantity surveyor's schedule. It lowers your taxable income without costing you anything that year.
- 5
Set your marginal tax rate
Choose the rate that matches your income. Your tax saving, and the value of negative gearing, scales directly with this rate.
A worked Australian example
Say you own an investment property renting for $550 a week, you earn enough to sit in the 37% tax bracket, and your deductions for the year add up like this:
- Annual rental income ($550 x 52)
- $28,600
- Loan interest
- -$32,000
- Expenses (rates, insurance, management, maintenance)
- -$7,000
- Depreciation
- -$6,000
- Net rental loss
- -$16,400
- Tax saving (37% of the loss)
- +$6,068
- After-tax holding cost
- $10,332 a year
The property runs at a $16,400 loss on paper, but because that loss is deductible against your salary you get $6,068 back at tax time. Your real cost to hold the property is about $10,332 a year, or roughly $199 a week. The strategy works when the property's capital growth over the year comfortably outweighs that holding cost.
What is negative gearing?
Gearing simply means borrowing to invest. A property is negatively geared when the cost of owning it, the loan interest plus expenses plus depreciation, is greater than the rent it brings in. That shortfall is a rental loss.
In Australia, you can deduct that rental loss against your other assessable income, such as your salary or wages. This reduces your taxable income for the year, so you pay less tax. It is one of the main reasons many Australians hold investment property even when it costs them money to run day to day.
How the tax benefit is calculated
The tax saving is your rental loss multiplied by your marginal tax rate. A $16,400 loss for someone on the 37% rate saves $6,068 in tax. The same loss for someone on the 30% rate saves $4,920, and for someone on the 45% rate it saves $7,380.
Your true cost of holding the property is the rental loss minus that tax saving. Because the benefit is tied to your marginal rate, negative gearing is worth more to higher income earners than to those on lower rates.
Negative gearing versus positive gearing
A positively geared property earns more in rent than it costs to hold, so it produces a profit. That profit is added to your taxable income, but the property pays its own way and puts cash in your pocket each week.
A negatively geared property costs you money to hold, offset partly by the tax benefit, and relies on capital growth to come out ahead. Neither approach is automatically better. It depends on your income, your cash flow, and how much growth you expect from the property.
Is negative gearing a good strategy?
Negative gearing is a holding strategy, not a goal in itself. You are accepting a cash shortfall now in the expectation that the property grows in value faster than it costs you to keep. If the growth does not arrive, you are simply losing money each year with a partial tax discount.
It also depends on having enough income to fund the shortfall and enough taxable income for the deduction to be useful. Depreciation can make a meaningful difference, since it lowers your taxable income without a cash outlay. As always, this calculator gives estimates only, and you should confirm your position with a qualified accountant.
Frequently asked questions
A property is negatively geared when the cost of owning it, mainly loan interest, expenses and depreciation, is more than the rent it earns. That creates a rental loss, which you can deduct against your other income in Australia to reduce the tax you pay.
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