Negative Gearing Calculator
See the rental loss on an investment property and the tax it saves at your marginal rate for 2026–27, plus the after-tax cash cost per week.
Tax saved this year
$1,536.00On a $600,000 property with a $120,000 deposit, 6% interest-only loan and $600 a week rent, the first year shows a net rental loss of $4,800 (negatively geared), which saves $1,536 in tax at a $120,000 income; after-tax cash flow is -$3,264 a year (-$63 a week).
| Loan amount | $480,000 |
|---|---|
| Repayments (interest-only, monthly) | $2,400.00 |
| Rent after vacancy | $30,000 |
| Cash expenses | −$6,000 |
| Interest (year 1) | −$28,800 |
| Net rental loss | -$4,800 |
| Tax saved (marginal 30% + Medicare) | $1,536 |
| Pre-tax cash flow | -$4,800 |
| After-tax cash flow (year) | -$3,264 |
| After-tax cash flow (week) | -$62.77 |
How this was calculated
| Rent: $600 × 50 weeks (after 2 vacant) | $30,000.00 |
|---|---|
| Cash expenses (rates, insurance, management, maintenance, strata) | -$6,000.00 |
| Loan interest, year 1 (6.00% on $480,000) | -$28,800.00 |
| Depreciation (non-cash deduction) | -$0.00 |
| Net rental loss (negatively geared) | -$4,800.00 |
| Tax saved at your rates (income $120,000, marginal 30%) | $1,536.00 |
| Principal repayments (cash out, not deductible) | -$0.00 |
| After-tax cash flow for the year | -$3,264.00 |
Tax effect = tax on $120,000 ($28,920) minus tax on $115,200 ($27,384), 2026–27 resident rates with Medicare levy. First-year interest from the amortisation schedule.
On a $600,000 property with a $120,000 deposit, 6% interest-only loan and $600 a week rent, the first year shows a net rental loss of $4,800 (negatively geared), which saves $1,536 in tax at a $120,000 income; after-tax cash flow is -$3,264 a year (-$63 a week).
Source: ATO Last verified How we keep this accurate
How negative gearing is calculated
A rental property is negatively geared when the deductible costs of owning it exceed the rent. The net rental loss reduces taxable income, so tax falls. The calculator works through one financial year:
- Rental income for the weeks the property is let (a vacancy allowance is deducted).
- Deductible expenses: loan interest (not principal), rates, insurance, management, repairs, strata, and depreciation if a figure is entered.
- Net rental loss (or profit) = income − deductible expenses.
- Tax effect = tax on your income without the property − tax on your income with the loss, at the current resident rates with Medicare levy. This handles income that crosses a bracket.
- After-tax cash flow = rent − cash expenses − loan repayments + tax saved.
Negative gearing example: $600,000 property, $120,000 income
With a $480,000 interest-only loan at 6%, rent of $600 a week for 50 weeks and $6,000 of expenses, the year shows $30,000 rent, $6,000 expenses and $28,800 interest: a $4,800 loss. On $120,000 of other income the marginal rate is 30% plus 2% Medicare, so the loss saves $1,536. The property still costs $3,264 a year after tax, about $63 a week. Adding $5,000 of depreciation raises the saving to $3,136 without changing the cash shortfall.
Marginal rates the loss is deducted at
| Taxable income (before the loss) | Marginal rate | Saving per $1,000 loss |
|---|---|---|
| $18,201 – $45,000 | 17% | $170 |
| $45,001 – $135,000 | 32% | $320 |
| $135,001 – $190,000 | 39% | $390 |
| Over $190,000 | 47% | $470 |
What this calculator doesn’t cover
- Capital gains tax on sale, capital growth and rent growth.
- Land tax (state-based; see the land tax calculators when they launch), borrowing costs claimed over five years, and the low-value pool.
- Non-resident or trust ownership, and the Medicare levy surcharge.
Frequently asked questions
How does negative gearing work?
A property is negatively geared when the deductible costs of holding it, mainly loan interest, exceed the rent. The net rental loss is deducted from your other income, so you pay less tax. On a $120,000 salary, a $4,800 loss saves $1,536 in tax (30% marginal rate plus 2% Medicare levy). The loss itself is still a real cost; the tax saving only covers part of it.
How much tax do I get back from negative gearing?
The saving equals the rental loss multiplied by your marginal tax rate including the Medicare levy. In 2026–27 that is 17% up to $45,000, 32% to $135,000, 39% to $190,000 and 47% above. A $10,000 loss saves $3,200 for someone on $100,000 and $4,700 for someone on $200,000. The calculator works it out exactly, including any bracket crossing.
Is negative gearing worth it?
Only if the property grows in value by more than the after-tax cash shortfall over time, since the tax saving never exceeds the loss. A property losing $4,800 a year that saves $1,536 in tax still costs $3,264 a year, or about $63 a week. Investors accept that cost expecting capital growth and rising rents. The calculator shows the weekly figure so it can be judged against a budget.
What expenses can I claim on a rental property?
Interest on the loan, council and water rates, land tax, insurance, property management fees, advertising, repairs and maintenance, strata levies, pest control, and depreciation of plant and capital works. Borrowing costs are claimed over five years. Not claimable: principal repayments, the purchase price, stamp duty (added to the cost base instead) and travel to inspect the property.
Does depreciation affect negative gearing?
Yes. Depreciation is a deduction without a cash outlay, so it increases the rental loss and the tax saving while leaving cash flow before tax unchanged. Capital works on buildings built after 1987 are claimed at 2.5% a year for 40 years; plant and equipment in a new property depreciates by effective life. Enter the annual figure from a quantity surveyor’s schedule to include it.
What happens when the property becomes positively geared?
As rent rises and the loan is paid down, income can exceed expenses. The net rental profit is then added to your taxable income and taxed at your marginal rate. The calculator shows this as extra tax rather than a saving. Interest-only loans keep the interest deduction higher for longer, which is why investors often choose them, at the cost of not building equity through repayments.
Sources and assumptions
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