Negative Gearing Calculator

A rental property is negatively geared when its deductible costs are more than the rent it earns. The loss is taken off your other income, such as your salary, so you pay less tax. If the rent is more than the costs, the property is positively geared and the profit is taxed at your marginal rate.

Negative gearing doesn't make a loss disappear. It gives back part of it, at your marginal tax rate. On a $13,800 loss and a 32% rate (30% plus the 2% Medicare levy), the tax saving is $4,416 and you still fund the other $9,384, less any depreciation you didn't pay cash for.

The rental result is rent less every deduction: loan interest, running costs and depreciation. The tax saving is the difference between your tax (income tax after the low income tax offset, plus the Medicare levy) with and without that result.

The cost after tax is the cash that actually leaves your pocket: rent less interest and running costs, plus the tax saving. Depreciation lowers your tax but isn't paid each year, which is why it makes the after-tax position better.

• Interest = loan amount x interest rate (interest only; principal repayments aren't deductible)
• Rental result = rent - interest - other costs - depreciation
• Tax saving = tax on your income - tax on (your income + rental result)
• Cost after tax = rent - interest - other costs + tax saving

Take a property renting for $600 a week ($31,200 a year) with a $500,000 loan at 6.4% ($32,000 of interest), $8,000 of other costs and $5,000 of depreciation. The rental loss is $13,800, and in cash the property is $8,800 a year short.

On a $110,000 income the whole loss comes off income taxed at 30% plus Medicare, so the tax saving is $4,416. The property costs you $4,384 a year after tax, about $84 a week.

On a $180,000 income the loss comes off income taxed at 37% plus Medicare, so the saving rises to $5,382 and the cost after tax falls to $3,418 a year, about $66 a week. The same property costs a higher earner less, which is why negative gearing is used most by people in the upper brackets.

Deductible each year: loan interest, council and water rates, strata levies, landlord insurance, property management fees, advertising for tenants, repairs and maintenance, land tax, and depreciation on fittings and the building (from a quantity surveyor's schedule).

Not deductible: principal repayments, travel to inspect a residential rental (since 1 July 2017), and costs of buying such as stamp duty, which form part of the property's cost base for capital gains tax instead. Improvements are claimed over time as capital works, not in one year.

Under the changes announced in the May 2026 Budget, an established home bought as an investment after 7:30pm AEST on 12 May 2026 can no longer have its rental loss deducted from your salary from 1 July 2027. The loss can only be used against income and gains from residential property, and anything unused is carried forward to later years. Some details are still being legislated, so check the ATO before you buy.

Properties held before that time, and newly built homes, keep the current treatment. For 2026-27 everyone is on the old rules. Tick Established home bought after 7:30pm, 12 May 2026 to see the 2027-28 position: in the example above the $4,416 saving disappears and the cost after tax becomes the full $8,800 a year.

2027-28 is also when the bottom tax rate falls from 15% to 14%. That changes tax on incomes under $45,000, so for most investors the saving on a loss is the same as in 2026-27.

A rental loss lowers your taxable income, but several tests add it back. HECS/HELP repayment income includes net rental losses, so negative gearing doesn't reduce your compulsory repayment. The same add-back applies to the Medicare levy surcharge test, Division 293, and several government payments and offsets.

To check a purchase from the start, use the investment property calculator for cash flow from a purchase price and deposit, and the stamp duty calculator for investor duty.