Negative gearing calculator
What an investment property actually costs you each week after the tax deduction, with depreciation separated from the expenses you really pay.
Covers 2026–27 income year · rates as at 2026-07-01
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.
On $140,000 the marginal rate is 37% plus Medicare, so a $1 loss returns about 39c — you are still 61c out of pocket for every dollar lost.
How this is calculated
How this is calculated
A deduction is a discount, not a profit
Losing $10,000 on a property at a 39% effective marginal rate returns $3,900 of tax. You are still $6,100 worse off in cash. Negative gearing only makes sense if capital growth exceeds that after-tax cost.
after-tax cost = cash loss − (loss × marginal rate)Depreciation is a deduction you never paid
Capital works at 2.5% a year and plant depreciation reduce taxable income without any cash leaving your account, so a property can be negatively geared on paper while being cash-flow neutral. This tool separates the two.
The tax saving is computed from real brackets
Rather than multiplying by a headline rate, the tool calculates your tax with and without the property. That matters when the loss drops you into a lower bracket, which a flat multiplication would overstate.
saving = tax on salary − tax on (salary − loss)Worked example: $650,000 loan at 6.2%, $620 a week rent, $140,000 salary
| Salary | $140,000 |
|---|---|
| Rent | $620 × 50 weeks |
| Interest | 6.2% on $650,000 |
| Expenses | $9,500 |
| Rental income | $31,000 |
|---|---|
| Interest | $40,300 |
| Marginal rate | 37% plus levy |
Two weeks of vacancy costs $1,240 of rent and returns only about $480 in tax, so occupancy matters far more to the outcome than the deduction does.
What this assumes
- A single property held in your own name.
- Interest-only on the full loan balance.
- Loss fully deductible against salary.
- Excludes capital gains on sale.
Where this commonly goes wrong
- Depreciation reduces your cost base, so every dollar claimed adds a dollar to the capital gain when you sell — it is deferral, not exemption.
- Plant and equipment depreciation was removed for second-hand residential property bought after 9 May 2017, so many investors cannot claim it at all.
- Rising rates hit the whole loan balance while rent adjusts once a year, so a small rate rise can double the weekly cost long before rent catches up.
Questions
How does negative gearing work?
When a property costs more to hold than it earns, the loss is deducted from your other income. At a 37% marginal rate plus Medicare, a $10,000 loss returns about $3,900 — you are still $6,100 out of pocket.
Does negative gearing save me money?
No. It reduces the cost of a loss, it does not create a gain. The strategy relies entirely on capital growth exceeding the after-tax holding cost, which is a bet on the market rather than on the tax system.
What is depreciation and why does it matter?
A deduction for the building and fittings declining in value, with no cash leaving your account. It can make a property negatively geared on paper while being cash-flow neutral, which is why the two figures are shown separately.
Does depreciation cost me later?
Yes. Claimed depreciation reduces your cost base, so it increases the capital gain when you sell. With the 50% CGT discount it is usually still worthwhile, but it is a deferral rather than a saving.
How much difference does vacancy make?
More than most investors model. Two weeks empty on $620 a week costs $1,240 of rent and returns only about $480 in tax relief, so a net $760 — larger than most single expense lines.
Is positive gearing better?
It produces income rather than a deduction, which is safer cash flow but taxed at your marginal rate. The choice is really between income now taxed at 39% and hoped-for growth taxed later at half that under the CGT discount.
Related tools
Sources
General estimate based on published ATO rates for the 2026–27 income year. 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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