Negative Gearing Calculator

What negative gearing actually means

A property is negatively geared when the deductible costs of holding it, mainly loan interest, but also expenses like agent fees, rates, insurance and depreciation, add up to more than the rental income it brings in. That net rental loss can generally be deducted against your other taxable income, most commonly your salary, which reduces the tax you pay overall. Any loss you can't use in a given year simply carries forward to offset future income. It's not a subsidy or a special scheme, it's the same general tax principle that applies to any investment loss, applied to property. For the full mechanics and a separate worked example, see our what is negative gearing guide.

Since the 2026-27 Federal Budget, this comes with an asterisk. From 1 July 2027, established residential properties bought after 7:30pm AEST on 12 May 2026 lose the ability to offset losses against salary, more on that further down. Properties bought before that date, and eligible new builds, keep full negative gearing indefinitely, which is what this calculator models.

Why the tax saving is smaller than people often assume

A common mistake is assuming a $10,000 rental loss is worth $10,000 back at tax time. It isn't, it's worth your marginal tax rate applied to that loss. At a 32% marginal rate, a $10,000 loss saves roughly $3,200 in tax, not $10,000. The remaining $6,800 is still a real cost that comes out of your pocket, the ATO isn't covering the rest, it's just that you're not paying tax on that portion of your income either. The table below shows the 2026-27 individual tax brackets this calculator uses, each combined with the 2% Medicare levy most taxpayers pay, since that's the rate a rental loss actually saves you against.

If you'd rather have the saving through the year instead of waiting for a lump sum at tax time, a PAYG withholding variation (ATO form NAT 2036) lets you reduce the tax withheld from your pay to reflect the expected deduction.

What expenses can you claim?

Most of the day-to-day costs of holding the property are deductible in the year you incur them. A few costs, mainly the ones that add lasting value or that get the property, don't reduce this year's tax bill directly, they get added to your cost base instead and reduce your capital gain when you eventually sell. Our investment property tax deductions guide covers this in full detail, including the depreciation trap that catches new investors.

Depreciation: the deduction that costs no cash

Depreciation is a deduction for the building structure and eligible fittings wearing out over time. Unlike interest or rates, no actual cash leaves your pocket for it each year, which is why it can make a property show a bigger tax loss than the real cash shortfall. There are two types. Division 43 (capital works) lets you claim 2.5% a year of the original construction cost, for up to 40 years, on buildings started after 15 September 1987. Division 40 (plant and equipment) covers removable or mechanical items, appliances, carpet, hot water systems and the like. Since 7:30pm AEST on 9 May 2017, second-hand plant and equipment in a residential rental property is no longer deductible if the property was acquired after that date, though new items you install yourself remain deductible either way.

A depreciation schedule from a quantity surveyor typically costs $600 to $800, and the fee itself is deductible. On a property built in the last 20 years it can commonly generate $5,000 to $15,000 a year in deductions, often the single biggest non-cash item in the calculation. One trade-off worth knowing, Division 43 deductions you claim reduce your cost base, which increases your capital gain when you eventually sell.

Worked example

Say you buy a $750,000 investment property with a $600,000 interest-only loan at 5.8%, and it rents for $28,600 a year, around $550 a week.

That $17,888 is the deductible loss the ATO cares about. But $5,000 of it is depreciation, money you never actually spend, so the real cash shortfall, interest and cash expenses less rent, is only $12,888 a year, around $248 a week, before any tax saving. This is the gap our misconception below is about, the tax saving applies to the full deductible loss, while the real cost you're covering is the smaller cash figure.

Scenario B needs your taxable income to stay above $190,000 even after subtracting the loss, otherwise part of the saving falls into the 39% bracket instead of 47%, and the saving is smaller. These figures are illustrative, plug your own numbers into the calculator above to see your actual result.

Negative gearing vs positive gearing

Negative gearing is fundamentally a bet on capital growth outweighing the cumulative cash shortfall. Many experienced investors aim for neutral gearing instead, where rent roughly covers costs and growth is the upside, without carrying an ongoing shortfall. If you're weighing up buying an investment property while renting where you actually live, our rentvesting guide covers how that changes the numbers.

Is negative gearing worth it?

If you're planning to fund the deposit using equity in your existing home rather than fresh cash, our guide to using equity to buy an investment property walks through how usable equity is worked out and the risks involved.

A major reform changes this from 1 July 2027

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 passed Parliament in June 2026. From 1 July 2027, losses on established (not newly built) residential property bought after 7:30pm AEST on 12 May 2026 can no longer be deducted against your salary or other income, they're quarantined against income from residential property instead, including capital gains from residential property. Unused losses still carry forward, just against future residential property income rather than your salary.

A "new build" here means it genuinely adds to housing supply, built on vacant land, or a demolish-and-replace that increases the number of dwellings. A knock-down rebuild that doesn't add extra dwellings, or a substantial renovation, doesn't qualify. This calculator models the traditional negative gearing rules and doesn't apply this quarantining restriction, since whether it applies depends on exactly when you bought and what kind of property it is.

The same reform changes capital gains tax too. From 1 July 2027, the 50% CGT discount is replaced for gains accruing after that date with cost base indexation plus a 30% minimum tax on real capital gains, gains accrued before then keep the 50% discount, and new build investors can choose between the two methods at sale. Since that ongoing loss and the eventual CGT bill are really two halves of the same investment decision, our capital gains tax guide and capital gains tax calculator cover what changes there in full. See our negative gearing glossary page for more detail on whether your specific property is affected.

Common misconceptions

1. 1. "The government pays for my loss." Not even close. You fund the majority of the shortfall yourself, at a 32% marginal rate you're still covering 68 cents of every dollar of loss.
2. 2. "Negative gearing guarantees profit through capital growth." Growth isn't guaranteed. Low-growth regional properties have delivered negative total returns even after the tax benefit is factored in.
3. 3. "Negative gearing is only for the wealthy." Anyone with taxable income can use it, but the benefit scales with your marginal rate, at a 17% marginal rate the saving is minimal.
4. 4. "I can claim all my renovation costs." Capital improvements aren't immediately deductible, they're added to your cost base and may be depreciable over time instead.
5. 5. "Depreciation means I get cash back." It's a non-cash deduction, it reduces your taxable income and your tax bill without requiring you to spend money that year, which is exactly why the real cash shortfall on a property is usually smaller than the deductible loss shown on paper.