Enter annual amounts for each expense. All property expenses are tax deductible.
Depreciation is a non-cash deduction. Get a quantity surveyor report for accurate figures.
Project how your investment may perform over time with growth assumptions.
Negative Gearing Calculator Updated February 2026
Calculate Your Negative Gearing Benefits
See how much tax you could save through negative gearing on your investment property. Plan your property investment strategy.
Use Calculator NowNegative gearing is one of the most discussed investment strategies in Australian property. It occurs when the costs of owning an investment property exceed the rental income it generates, creating a tax-deductible loss. Our free Negative Gearing calculator helps Australian property investors understand the potential tax benefits and cash flow implications of their investment properties.
Whether you are considering your first investment property or managing an existing portfolio, understanding negative gearing helps you make informed decisions about your property investment strategy and tax planning.
What Is Negative Gearing?
Negative gearing occurs when your investment property expenses exceed the rental income you receive. This loss can be deducted from your other taxable income, such as salary and wages, reducing your overall tax bill.
Negative Gearing Loss = Total Property Expenses − Rental Income
Tax Benefit = Loss Amount × Your Marginal Tax Rate
For example, if your property costs $30,000 per year to maintain but only generates $25,000 in rent, you have a $5,000 loss. If you are in the 32.5% tax bracket, this saves you $1,625 in tax.
Key Takeaways
- Tax Deduction: Property losses reduce your taxable income
- Marginal Tax Rate: Higher earners receive greater tax benefits
- Capital Growth Focus: Strategy relies on property value increasing
- Cash Flow Impact: You must fund the shortfall from other income
- ATO Rules Apply: Strict deduction rules must be followed
How Does Negative Gearing Work?
Negative gearing works by offsetting investment property losses against your other income. Here is how the process operates:
The Basic Mechanism
- You purchase an investment property
- The rental income received is less than the total costs of ownership
- The difference (loss) is calculated for tax purposes
- This loss is deducted from your other taxable income
- You pay less tax overall, effectively receiving a partial refund of your losses
Tax Savings Calculation
The amount you save depends on your marginal tax rate:
| Taxable Income | Marginal Rate | Tax Saved per $1,000 Loss |
|---|---|---|
| $18,201 - $45,000 | 16% | $160 |
| $45,001 - $135,000 | 30% | $300 |
| $135,001 - $190,000 | 37% | $370 |
| Over $190,000 | 45% | $450 |
Note: These rates exclude the 2% Medicare Levy which also applies.
How to Use Our Negative Gearing Calculator
Our calculator helps you model the tax benefits and cash flow of your investment property:
- Enter Property Value: Input the purchase price or current value
- Input Rental Income: Enter weekly or annual rent received
- Add Loan Details: Enter loan amount, interest rate, and type
- Include Expenses: Add rates, insurance, maintenance, management fees
- Enter Your Income: Input your taxable income to calculate tax savings
- Calculate: See your cash flow position and tax benefits
Example Calculation
Scenario: Michael owns an investment property with the following figures:
- Weekly rent: $500 ($26,000/year)
- Interest expense: $28,000/year
- Other expenses: $6,000/year (rates, insurance, maintenance)
- Total expenses: $34,000/year
- Net rental loss: $8,000/year
- Marginal tax rate: 30%
- Tax saving: $8,000 × 30% = $2,400
- After-tax loss: $8,000 - $2,400 = $5,600
Michael must fund $5,600 per year from his other income while hoping for capital growth.
Understanding the Tax Benefits
The primary benefit of negative gearing is the tax deduction. Here is how it works in practice:
Reducing Your Taxable Income
Your property loss reduces your assessable income dollar for dollar. If you earn $100,000 from employment and have a $10,000 property loss, you are taxed as if you earned $90,000.
Medicare Levy Savings
In addition to income tax savings, you also save the 2% Medicare Levy on the deducted amount. On a $10,000 loss, this provides an additional $200 saving.
Depreciation Benefits
Even if your property is cash-flow positive after tax, depreciation deductions can create a paper loss. Building depreciation (capital works) and fixture depreciation (plant and equipment) can be claimed over time.
Claimable Property Deductions
The ATO allows various property-related expenses to be deducted:
Immediate Deductions
- Interest: On loans used to purchase the property
- Council Rates: Annual property taxes
- Insurance: Building and landlord insurance premiums
- Property Management: Fees paid to agents
- Repairs: Costs to fix damage or deterioration
- Advertising: Costs to find tenants
- Legal Fees: For tenant disputes or lease preparation
- Utilities: If paid by the landlord
Capital Works Deductions
- Building Depreciation: 2.5% per year for 40 years on construction costs
- Renovations: Structural improvements and extensions
Risks of Negative Gearing
While negative gearing offers tax benefits, it carries significant risks:
Cash Flow Risk
You must cover the gap between rental income and expenses from your other income. If your financial situation changes (job loss, illness), funding this shortfall becomes difficult.
Capital Growth Uncertainty
Negative gearing assumes property values will rise enough to offset your losses. If property prices stagnate or fall, you face losses without compensation.
Interest Rate Risk
Rising interest rates increase your holding costs. A 2% rate increase on a $500,000 loan adds $10,000 per year to your expenses.
Legislative Risk
Tax rules can change. Proposals to limit negative gearing have been discussed politically and could reduce future benefits.
Vacancy Risk
Periods without tenants mean no rental income but ongoing expenses, increasing your losses significantly.
Negative vs Positive Gearing
Understanding the difference helps you choose the right strategy:
| Factor | Negative Gearing | Positive Gearing |
|---|---|---|
| Rental Income vs Expenses | Income less than expenses | Income exceeds expenses |
| Tax Treatment | Loss reduces taxable income | Profit adds to taxable income |
| Cash Flow | Requires ongoing funding | Generates surplus income |
| Property Type | Often new or growth-focused | Often established, high-yield |
| Typical Locations | Capital cities, growth areas | Regional areas, high-demand |
| Strategy Focus | Capital appreciation | Income generation |
Recent Tax Changes Affecting Negative Gearing
Several changes have affected property investors:
2017 Changes
- Travel expenses to inspect rental properties no longer deductible
- Depreciation on second-hand fixtures and fittings restricted
- Applies to properties purchased after 9 May 2017
Ongoing Considerations
Property investment remains under scrutiny. While negative gearing has not been abolished, future changes are always possible. Consider the long-term stability of current tax treatment when making investment decisions.
Is Negative Gearing Right for You?
Consider these factors before negatively gearing:
When Negative Gearing May Suit You
- You are in a high tax bracket (30% or higher)
- You have stable employment and surplus income
- You are investing for long-term capital growth (10+ years)
- You can withstand interest rate increases
- You have a diversified investment portfolio
When to Consider Alternatives
- You need positive cash flow from investments
- You are in a low tax bracket
- You have limited surplus income
- You are nearing retirement
- You prefer lower-risk investments
Professional Advice Recommended
Property investment involves significant financial commitment. Consider consulting a qualified accountant, financial advisor, and mortgage broker before proceeding with a negative gearing strategy.
Negative Gearing Around the World
Negative gearing as a tax strategy is not exclusive to Australia. Several countries permit deductions for investment property losses against other income, though the rules, limits, and political debates around each system differ significantly.
Australia's negative gearing rules are among the most favourable globally, allowing unlimited deduction of investment property losses against all sources of income. This has made property investment a cornerstone of Australian wealth-building strategies, though the policy has been subject to ongoing political debate about its impact on housing affordability.
Frequently Asked Questions
Negative gearing occurs when the costs of owning an investment property (interest, rates, insurance, maintenance) exceed the rental income it generates. This loss can be deducted from your other taxable income, reducing your tax bill.
Your tax savings depend on your marginal tax rate. For every $1,000 of property loss: 16% bracket saves $160, 30% bracket saves $300, 37% bracket saves $370, and 45% bracket saves $450. You also save the 2% Medicare Levy on the loss amount.
You can negatively gear residential, commercial, and industrial properties, as well as vacant land (under certain conditions). The property must be genuinely available for rent, and you cannot claim deductions for periods of personal use.
Claimable expenses include interest on investment loans, council rates, insurance, property management fees, repairs and maintenance, advertising for tenants, legal fees, and depreciation on the building and fixtures. Travel expenses and depreciation on second-hand items are restricted for newer properties.
No, anyone with taxable income can benefit from negative gearing. However, higher-income earners in the 37% or 45% tax brackets receive greater tax savings per dollar of loss. Those in lower brackets should carefully consider whether the strategy is worthwhile given the cash flow implications.
Rising interest rates increase your property holding costs, potentially increasing your negative gearing losses. While this increases your tax deduction, you must fund the additional shortfall from your own income. Ensure you have sufficient surplus income and a buffer to handle rate increases.
Yes, you can negatively gear overseas investment properties, but additional rules apply. You must declare all rental income in your Australian tax return, and currency conversion requirements apply. Some deductions available for Australian properties may not apply overseas. Seek specialist tax advice.
Depreciation is a non-cash deduction that can increase your tax losses without requiring actual expenditure. You can claim 2.5% of construction costs annually for 40 years (capital works), plus depreciation on fixtures and fittings. A quantity surveyor report maximizes legitimate depreciation claims.
Repairs restore something to its original condition and are immediately deductible. Improvements enhance the property beyond its original state and must be depreciated over time. For example, fixing a broken fence is a repair; replacing a fence with a higher one is an improvement.
Yes, you can claim deductions during vacant periods provided the property is genuinely available for rent. You must be actively seeking tenants, and the vacancy should be reasonable. Extended vacancies without genuine effort to rent may attract ATO scrutiny.
Negative gearing has not been abolished and remains available. While it has been debated politically and some restrictions were introduced in 2017 (travel and depreciation changes), the core tax deduction remains in place. Future changes are always possible, so consider legislative risk in your strategy.
Yes, a quantity surveyor's depreciation schedule is highly recommended. They identify all depreciable items and maximize your legitimate claims. The cost of the report is also tax-deductible. For new properties or recently renovated properties, the report can significantly increase your deductions.
Negative gearing is typically a long-term strategy. Most investors plan to hold for at least 7-10 years to allow for capital growth that exceeds accumulated losses. Short-term holding increases the risk that property price growth won't cover your out-of-pocket costs.
SMSFs can invest in property, but different rules apply. Losses in an SMSF cannot be offset against personal income - they remain within the fund. SMSF property investment has strict borrowing rules (limited recourse borrowing arrangements) and compliance requirements. Seek specialist SMSF advice before proceeding.
You must keep records for 5 years from the date you lodge your tax return. This includes loan documents, bank statements showing interest payments, receipts for all expenses, lease agreements, rental statements, and depreciation schedules. Good record-keeping is essential if the ATO queries your claims.
Trusted Resources
For official information about negative gearing and property investment:
Official Resources
- ATO - Renting Out Your Property - Official ATO guidance on rental properties
- ATO - Deductions You Can Claim - Detailed deduction rules
- MoneySmart - Property Investment - Government-backed investment guidance
Created by: CalculatorZone Financial Team
Last Updated: February 2026
Methodology: This calculator uses current Australian tax rates and negative gearing rules published by the ATO for the 2024-25 and 2025-26 financial years.
This calculator provides estimates for educational purposes only. ATO rules and individual circumstances vary. Always seek professional tax advice before making investment decisions.
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Use our free Negative Gearing calculator to see your potential tax savings and cash flow position.
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