Negative Gearing Calculator
Cash flow and tax on an Australian investment property — rent less interest, expenses and depreciation, the tax saved at your marginal rate, and the real weekly cost after the refund.
How it works
taxable loss = rent − interest − expenses − depreciation; tax saved = tax(other income) − tax(other income + loss); after-tax cost = cash loss + tax saved
Negative gearing lets an investor offset a rental loss against salary, so the ATO refunds the loss at the marginal rate — 39% including Medicare for someone on $120,000. Depreciation on the building and fittings deepens the paper loss without costing cash. The strategy only works if capital growth outpaces the after-tax holding cost, and it magnifies both gains and losses because the loss is real money each week. Rising interest rates turn a mildly negative property into a large drain quickly.
Worked example
$650 a week rent (2 weeks vacant) against $37,200 interest and $9,000 expenses: $13,700 cash loss, $19,700 taxable loss, $6,304 tax back at 32% (30% + Medicare levy) — $142 a week out of pocket.
Frequently asked questions
Can losses carry forward?
Yes — if the loss exceeds your income the excess carries to future years.
What about when I sell?
The gain is taxed as a capital gain with the 50% discount after 12 months — the deferred half of the equation.
Related calculators
Uses 2025–26 Australian rates and thresholds (residents). Figures change each July — confirm with the ATO, your state revenue office or a registered tax agent. Educational estimate, not tax advice.