Negative Gearing Calculator
Calculate rental property net loss, tax saving, and after-tax cash flow using 2025-26 Australian income tax rates with loan interest, depreciation, and full expense breakdown.
Rental Income
Total rent received per year (gross, before expenses).
Loan Details
The outstanding balance of your investment property loan (interest-only or P&I).
Interest component only. For P&I loans, use the full rate — principal repayments are NOT deductible.
Other Deductible Expenses (Annual)
Repairs to restore original condition are immediately deductible. Initial repairs and improvements are capital works (Div 43).
Non-Cash Deductions
Hot water systems, carpets, ovens etc. — effective life schedule. Note: post-9 May 2017 purchasers cannot claim Div 40 on second-hand assets.
2.5% of original construction cost per year for buildings built after 15 September 1987 (residential). E.g. $100,000 construction cost → $2,500/yr.
Your Other Taxable Income
Your salary + other income. The rental loss reduces this, saving tax at your marginal rate.
Results
Net rental loss (negatively geared)
$30,000 income − $54,000 total deductions
Annual tax saving
$24,000 loss × 32.0% effective marginal rate (30.0% income tax + 2.0% Medicare)
After-tax cash flow
-$208.08/wk — rental income minus cash expenses plus tax saving
Total deductions
$39,000 interest + $9,500 other + $5,500 depreciation
Loan interest
6.5% on $600,000 loan
Weekly out-of-pocket (pre-tax)
Before accounting for the tax saving
Marginal rate
At $100,000 income — 30.0% + 2% Medicare
Estimate only. This does not account for CGT on eventual sale (50% discount for assets held >12 months), stamp duty, conveyancing, or strata levies. Land tax, water charges, advertising, and other expenses may also be deductible. Consult a registered tax agent for advice specific to your situation. Rates: ATO 2025-26 rental properties guide + tax-data-2026.ts.
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Frequently asked questions
What is negative gearing?
Negative gearing is when your deductible rental property expenses (primarily loan interest) exceed the rental income you receive. The resulting net loss is deducted against your other assessable income — usually your salary — which reduces your taxable income and the income tax you pay. Investors accept a short-term cash shortfall hoping for capital growth and tax savings over the long term.
What expenses can I deduct from my rental property?
Immediately deductible expenses include: loan interest (not principal repayments), property management fees, council rates, water charges, landlord insurance, land tax, advertising costs, repairs and maintenance (to restore original condition), and stationery/postage for managing the property. Capital works deductions (Div 43) at 2.5% per year apply to the original construction cost of buildings built after 15 September 1987. Plant and equipment (carpets, ovens, hot water systems) can be depreciated under Div 40, though post-9 May 2017 buyers cannot claim this on second-hand assets.
How is the tax saving on negative gearing calculated?
The tax saving equals your net rental loss multiplied by your effective marginal tax rate (income tax rate plus 2% Medicare levy). For example, if your salary puts you in the 30% income tax bracket and you have a $15,000 rental loss, your tax saving is $15,000 × 32% = $4,800. The higher your income, the greater the tax saving from negative gearing — which is why it is most valuable for higher earners.
What is the CGT discount on a negatively geared property?
When you sell a negatively geared property that you have owned for more than 12 months, only half your capital gain is included in your taxable income — the 50% Capital Gains Tax discount. This is a significant tax concession and a key part of the investment equation for negative gearing strategies. Note that if you claimed capital works deductions (Div 43) during the ownership period, the cost base is reduced by those deductions when calculating the capital gain.
Can I claim depreciation on a second-hand investment property?
For properties purchased after 9 May 2017, you cannot claim Div 40 depreciation on second-hand (previously used) plant and equipment — items like carpets, blinds, and kitchen appliances already installed when you bought the property. You can still claim Div 43 capital works deductions on the building structure itself, and you can claim Div 40 on any new plant and equipment you install after purchase. New properties purchased from a developer are not affected by this rule.
Is negative gearing always beneficial?
Not necessarily. Negative gearing only makes sense if you can sustain the out-of-pocket cash shortfall each year and if sufficient capital growth materialises over time to offset the accumulated losses. It also ties up capital that could be invested elsewhere. The tax saving reduces but does not eliminate the cash shortfall. For lower income earners the tax saving is smaller (lower marginal rate), making negative gearing less attractive than for high earners.