Negative Gearing Calculator
See the real after-tax cost of a negatively geared property, once the tax saving from the loss is factored in, not just the raw cash shortfall.
Your details
Estimated after-tax cost per week
$106
Net rental result
-$14,000
Cash shortfall (before tax saving)
$10,000
Estimated tax saved
$4,480
Treats the loan as interest-only for the year and doesn't model capital gains tax on an eventual sale, land tax, changes in rent or expenses over time, or the fact a lump sum tax saving arrives at tax time, not weekly. This tool provides estimates only, is not financial or tax advice, and doesn't replace advice from a registered tax agent.
How to use this calculator
- 1. Enter the loan amount, interest rate, rental income and other expenses for the property.
- 2. If you have a depreciation schedule from a quantity surveyor, enter the annual amount, this is a real deduction even though no cash actually leaves your pocket for it.
- 3. Enter your taxable income from other sources, this determines your tax bracket and how much the loss is worth to you.
- 4. The calculator shows your cash shortfall before tax, the estimated tax you'd save, and the real weekly cost after that saving.
What negative gearing actually means
A property is negatively geared when the 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 loss can be deducted against your other taxable income, which reduces the tax you pay overall. 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. The tax saving doesn't make the property free to hold, it just softens the real cost, which is what this calculator is trying to show clearly rather than letting the tax benefit hide the actual cash you're putting in.
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's not, it's worth your marginal tax rate applied to that loss, so at a 32% marginal rate (30% plus the Medicare levy), 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. Whether a negatively geared property makes sense depends on whether the capital growth and eventual gain outweigh that ongoing after-tax cost, which this calculator doesn't attempt to model since it depends heavily on individual assumptions about future growth.
FAQ
Is negative gearing only useful for high income earners?
The tax saving is proportional to your marginal tax rate, so it's worth more per dollar of loss to someone on a higher tax bracket. But the underlying investment case for a property, its rental yield and expected capital growth, matters more than the tax saving alone at any income level.
What's the difference between negative and positive gearing?
Negative gearing means the property costs more to hold than it earns in rent, creating a deductible loss. Positive gearing means rental income exceeds costs, creating a taxable profit. Neither is inherently better, it depends on your goals, cash flow and tax situation.
Does this calculator account for capital gains tax when I sell?
No. Negative gearing is about the ongoing income tax treatment while you hold the property. Capital gains tax applies separately when you eventually sell, and depends on how long you've held it and your income in the year of sale. Our capital gains tax calculator covers that separately.
What is depreciation, and why does it matter here?
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 tax loss even when it's roughly cash flow neutral. A quantity surveyor's depreciation schedule sets out the exact amount you can claim.
Is negative gearing at risk of being changed or removed?
Negative gearing policy has been debated in Australian politics for years, and proposals to limit it have been floated by various parties without becoming law. There's no current legislated change as of this year, but it's worth staying aware of policy discussions if this factors into a long-term investment decision.
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Disclaimer
Treats the loan as interest-only for the year modelled, a principal and interest loan's deductible interest portion shrinks over time, so this can overstate the deduction in later years. Doesn't model capital gains tax on an eventual sale, land tax, or changes in rent or expenses over time, and the tax saving shown arrives at tax time, not weekly. This tool provides estimates only, is not financial or tax advice, and doesn't replace advice from a registered tax agent.