Negative gearing calculator
What an investment property costs each week after tax relief, with non-cash deductions separated from real outgoings.
Costs you each week, after tax
Estimate$196.04
10,194 a year at a 39% marginal rate
- Tax saved by the loss
- $8,606.00
- Cash shortfall before tax
- $18,800
- Taxable loss claimed
- $25,800
| Rental income | $31,000 |
|---|---|
| Interest | -$40,300 |
| Cash expenses | -$9,500.00 |
| Depreciation (no cash cost) | -$7,000.00 |
| Tax saved | $8,606.00 |
| Net cost after tax | -$10,194 |
- A loss saves tax at 39%, so every dollar lost returns 39c. The strategy only works if capital growth exceeds the after-tax cost.
- Depreciation reduces your cost base, so claiming it raises the capital gain when you eventually sell.
- Assumes 50 weeks let — a year with no vacancy is optimistic for most properties.
At a 37% marginal rate a $1 rental loss returns about 39c after the Medicare levy, leaving you 61c out of pocket for every dollar lost.
How this is calculated
How this is calculated
Tax relief never exceeds the loss
Losing $10,000 at a 39% marginal rate returns $3,900, leaving you $6,100 down in cash. A geared investment only works if capital growth exceeds that after-tax cost.
after-tax cost = cash loss − (loss × marginal rate)Non-cash deductions distort the picture
A $7,000 depreciation claim reduces taxable income without any money leaving your account, so a property can show a paper loss while being cash-flow neutral. The two figures are separated here.
Bracket movement matters
The saving is computed by taxing your income with and without the loss, rather than multiplying by a headline rate. On a $140,000 salary a large loss can drop you from 37% to 30%, which a flat multiplication would overstate.
Worked example: $650,000 loan at 6.2% with $620 a week rent
| Rent | $620 × 50 weeks |
|---|---|
| Interest | 6.2% on $650,000 |
| Rental income | $31,000 |
|---|---|
| Interest | $40,300 |
Loss-offset rules differ by country — many ring-fence rental losses against rental income only. Pick a country above for the treatment that applies.
What this assumes
- A single property held personally.
- Interest charged on the full balance.
- Loss deductible against other income.
- Excludes capital gains on eventual sale.
Where this commonly goes wrong
- Non-cash deductions usually reduce your cost base, adding to the capital gain when you sell rather than removing tax.
- Depreciation on second-hand assets is restricted or unavailable in many systems, so headline figures may not apply to you.
- Interest applies to the full balance while rent typically adjusts annually, so rate rises bite well before rent catches up.
Questions
What does a rental loss actually save?
Only your marginal rate. A $10,000 loss at 39% returns $3,900, leaving $6,100 of real cost. The tax deduction reduces a loss; it never converts one into a profit.
Why separate depreciation from other expenses?
Because it is a deduction with no cash outflow. Including it in cash-flow figures makes a property look more expensive to hold than it is, while excluding it from tax figures understates the deduction.
What happens when I sell?
Depreciation claimed generally reduces the cost base, so it increases the taxable gain. The relief is deferred rather than removed, though a capital gains discount can still leave you ahead.
Related tools
Sources
General estimate based on published ATO rates for the the current period. Not tax advice, and it does not consider your objectives, financial situation or needs. Confirm your position with the ATO or a registered tax agent.
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