Negative Gearing Calculator Australia

How to Use This Negative Gearing Calculator

Enter your annual salary, property purchase details, loan information, and expected rental income. Add your property expenses including rates, insurance, and management fees. Optionally include depreciation estimates to see the full tax benefit. The calculator shows your annual tax saving and the true after-tax cost of holding the investment property.

Understanding Negative Gearing in Australia

Negative gearing is a tax strategy where you intentionally make a loss on an investment property to reduce your overall tax. When your property expenses exceed rental income, the ATO allows you to offset this loss against your salary and other income, effectively getting a tax refund on the loss.

How the Tax Benefit Works

The tax benefit depends on your marginal tax rate. If you earn $100,000 (32% marginal rate including Medicare) and your property loses $10,000, you only pay tax on $90,000. This saves you $3,200 in tax. Higher income earners in the 37% or 45% brackets receive proportionally larger tax benefits.

2025-26 Marginal Tax Rates

Deductible Investment Property Expenses

• Loan interest: The largest deduction for most investors—100% of interest on your investment loan is deductible
• Council and water rates: Annual rates charged by local councils
• Landlord insurance: Building insurance and landlord liability cover
• Property management fees: Typically 5-10% of rent, fully deductible
• Repairs and maintenance: Keeping the property in its current condition
• Strata/body corporate fees: For apartments and townhouses
• Land tax: Varies by state, applies when land value exceeds thresholds
• Depreciation: Non-cash deductions for building and fixtures wear

The Power of Depreciation

Depreciation is a "phantom" deduction—you claim it without spending money. For buildings constructed after 1987, you can claim 2.5% of the building value (excluding land) annually. Fixtures like carpets, blinds, and appliances depreciate faster at varying rates. A quantity surveyor's depreciation schedule typically costs $500-$700 and can identify $5,000-$15,000 in annual deductions for newer properties.

Is Negative Gearing Right for You?

Negative gearing works best for high-income earners who can maximize the tax benefit and afford the ongoing shortfall. Consider these factors:

• Cash flow: You need to fund the gap between rent and expenses from your salary
• Time horizon: Property investment is typically a long-term strategy (7+ years)
• Capital growth: The strategy relies on property values increasing over time
• Interest rates: Rising rates increase costs and reduce tax benefits

Frequently Asked Questions

Can I claim renovations as a deduction?

Capital improvements (renovations that improve the property beyond its original condition) are not immediately deductible. However, they can be depreciated over time and add to your cost base, reducing capital gains tax when you sell.

What happens when I sell a negatively geared property?

When you sell, you may owe capital gains tax (CGT) on any profit. If you've held the property for more than 12 months, you receive a 50% CGT discount. Depreciation claimed reduces your cost base, potentially increasing your capital gain.

Should I use an offset account or pay down the investment loan?

For investment loans, it's usually better to use an offset account rather than making extra repayments. This preserves your deductible debt while still reducing interest. If you pay down the loan and later need to redraw, the redrawn amount may not be tax-deductible.