What is negative gearing?

Negative gearing occurs when the costs of owning an investment property — including loan interest, maintenance, insurance, and depreciation — exceed the rental income it generates. The resulting loss can be offset against your other taxable income, reducing the amount of tax you pay.

How is negative gearing calculated?

Negative gearing is calculated by subtracting your total property expenses from your gross rental income. If expenses exceed income, the difference is your net rental loss. This loss reduces your taxable income. For example, if your rental income is $25,000 and expenses are $35,000, you have a $10,000 loss that reduces your taxable income by $10,000.

What expenses can I claim on a negatively geared property?

Deductible expenses generally include loan interest (the largest component for most investors), property management fees, council rates, water rates, insurance, repairs and maintenance, depreciation on the building and fixtures, strata fees, and landlord insurance. Capital improvements are not immediately deductible but may be claimed over time through depreciation.

How does my tax rate affect negative gearing benefits?

The higher your marginal tax rate, the greater the tax benefit from negative gearing. A $10,000 rental loss saves $4,500 in tax for someone on the 45% marginal rate, but only $3,000 for someone on the 30% rate. This is why negative gearing is often discussed in the context of higher-income earners.

Is negative gearing a good investment strategy?

Negative gearing is a tax strategy, not an investment strategy on its own. The tax savings offset some of the holding costs, but the investment only succeeds if the property grows in value over time. A property that doesn't achieve sufficient capital growth can result in a net loss even after tax benefits. Your cash flow, risk tolerance, and investment timeframe all matter.

What is the break-even capital growth rate?

The break-even capital growth rate is the minimum annual increase in property value needed to cover your after-tax holding costs. If your annual out-of-pocket cost (after tax savings) is $8,000 on a $600,000 property, you need at least 1.3% growth per year just to break even. This calculator estimates this rate based on your inputs.

Should I choose interest-only or principal and interest loans?

Interest-only loans maximise your tax deductions because the full repayment is deductible interest (principal repayments are not deductible). However, you're not reducing your debt. Principal and interest loans build equity faster and reduce long-term interest costs, but offer lower annual deductions. The right choice depends on your cash flow, investment horizon, and overall financial strategy.

What happens when I sell a negatively geared property?

When you sell, any profit is subject to capital gains tax (CGT). If you've held the property for more than 12 months, you may be eligible for the 50% CGT discount — meaning only half the gain is added to your taxable income. The total return on a negatively geared investment is the capital gain minus cumulative holding costs, adjusted for the tax savings received along the way.

Can negative gearing be combined with depreciation?

Yes. Depreciation is a non-cash deduction that increases your rental loss on paper without requiring actual spending. Building depreciation (Division 43) allows you to claim the construction cost over 40 years for properties built after 1985. Plant and equipment depreciation (Division 40) covers items like carpets, blinds, and appliances. A quantity surveyor can prepare a depreciation schedule.

Back to Calculators

Negative Gearing Calculator

Calculate your property investment tax benefits, cash flow, and required capital growth.

Investment Details

Annual Salary

Property Price

Weekly Rental Income

Loan Amount

Interest Rate

Loan Term

years

Loan Type

Annual Property Expenses(excluding loan interest)

Include rates, insurance, maintenance, property management, depreciation, etc.

Summary

Tax Rate

30.00%

*does not include Medicare levy

Annual Rent

$28,600

Annual Loan Payment

$40,958

Total Expenses

$48,958

Loan payment + property expenses

Net Cash Flow

-$20,358

Annual rental income minus total expenses

Tax Impact

$4,297

Refund from taxable loss (30.00%)

Annual Cost to Hold

$16,061

Net cost after tax benefits

Required Annual Capital Growth

2.68%

Minimum growth needed to offset holding costs (vs property price)

Annual Breakdown

Rental Income

Loan Payment

Property Expenses

Frequently Asked Questions About Negative Gearing

Common questions about property investment tax benefits, deductions, and cash flow

Official ATO Information

For official rules, thresholds, and eligibility criteria, refer to the Australian Taxation Office.

View ATO Rental Property Tax Information

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General Information Only

This calculator provides general information only and does not constitute personal financial advice. Results are estimates based on the inputs provided and current ATO rates. Your actual tax obligations may differ. Please consult a licensed financial adviser before making any financial decisions.

This calculator shows year one. But will this property actually build your wealth over time — or just keep you busy?

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