Negative Gearing Calculator
Calculate the annual loss, tax benefit, and true out-of-pocket cost of a negatively geared investment property.
| Annual Property Loss | $0 |
| After-Tax Cash Flow | $0 |
| Annual Rental Income | $0 |
| Annual Interest Cost | $0 |
How Negative Gearing Works
An investment property is negatively geared when the deductible costs exceed the rental income. The resulting loss is used to offset your taxable income from other sources (usually your salary), reducing the income tax you pay. That holds for every residential rental in FY 2026–27; from 1 July 2027 it holds only for grandfathered properties and new builds.
What Costs Are Deductible?
- Now: loan interest, council and water rates, land tax, landlord insurance, agent fees, repairs and maintenance, body corporate fees, and assets costing $300 or less.
- Over time: capital works (Div 43) at 2.5% a year for 40 years, for residential construction started after 15 September 1987; decline in value (Div 40) of assets over $300, which the depreciation calculator estimates; borrowing expenses over $100, over five years or the loan term.
- Never: principal repayments; travel for a residential rental since 1 July 2017; second-hand Div 40 assets in residential property acquired after 7:30 pm on 9 May 2017 (only new assets you buy qualify); stamp duty, which goes into the CGT cost base.
Note: Capital improvements (extensions, new kitchens) are not immediately deductible — structural work is claimed as capital works (usually 2.5% a year), and fittings are depreciated under Div 40.
How it's calculated
Rent is weekly rent × 52; interest is loan × rate. Interest plus other costs, minus rent, is the loss; loss × marginal rate is the tax benefit.
Worked example — $450 a week at 30%
$450 a week of rent against a $500,000 loan at 6.2%, with $6,000 of other costs. Rent is $23,400 and interest $31,000, so the loss is $13,600. At 30%, $4,080 comes back, so after-tax cash flow is −$9,520 a year, about $183 a week.
The same loss at each marginal rate
A $600-a-week rental, $600,000 at 6.5% and $5,000 of other costs: $31,200 of rent against $39,000 of interest is a $12,800 loss.
| Marginal rate | Tax back | Your cost | Tax back incl. 2% Medicare (not modelled) |
|---|---|---|---|
| 30% | $3,840 | $8,960 | $4,096 |
| 37% | $4,736 | $8,064 | $4,992 |
| 45% | $5,760 | $7,040 | $6,016 |
Even at 45%, you fund 55% of the loss yourself.
Why the toggle is approximate
On a $140,000 salary, the $12,800 loss takes taxable income to $127,200, below the 37% threshold. Tax falls from $32,870 to $28,680: $4,190, not the $4,736 the 37% toggle shows. The income tax calculator has the exact figure.
What changes from 1 July 2027
The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026, assented 26 June 2026) limits negative gearing on residential property from the 2027–28 income year.
| Residential property | Loss against salary from FY 2027–28? | $12,800 loss at 37%, FY 2027–28 |
|---|---|---|
| Held or under contract before 7:30 pm AEST, 12 May 2026 | Yes, until sold | $4,736 back |
| New build | Yes | $4,736 back |
| Established, contracted from then on | No — against capital gains that year, then carried forward against future residential property income | $0; $12,800 carried forward |
The detail of “new” is still being finalised. The Budget describes a dwelling built on vacant land, or a demolish-and-replace adding dwellings, bought by its first purchaser.
Commercial property and shares are unaffected, and super funds are excluded. The same Act swaps the 50% CGT discount, from 1 July 2027, for CPI indexation plus a 30% minimum tax on real gains; earlier gains keep the discount, and new-build investors can pick either. 2025–26 returns are unaffected.
Cash flow and caveats
Getting the benefit each pay
A PAYG withholding variation has your employer withhold less, so the benefit lands in each pay rather than as a refund after 30 June.
The redraw trap
Redraw $30,000 from the investment loan for a car and interest on that $30,000 isn't deductible, per the ATO. The offset savings calculator shows the alternative.
What this calculator doesn't model
One flat rate: no 2% Medicare levy, no 15% band, no bracket straddling. No depreciation (add it to other costs), no vacancy, and no FY 2027–28 quarantining of established homes bought after the Budget.
Sources
- Act No. 49 of 2026
- ATO: the reform, tax rates, Rental properties 2026, interest, capital works, second-hand assets, travel expenses, CGT on sale, PAYG variation, 2025–26 claims
- Budget 2026–27 explainer