Australia Negative Gearing Calculator 2024-25
Calculate your rental property tax benefit from negative gearing. Rental loss Γ marginal tax rate = ATO subsidy. Before/after tax comparison with full cash flow analysis.
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Your income excluding the property A$
Gross rent received A$
Interest component only (not principal) A$
A$
A$
A$
A$
Non-cash deduction β get a depreciation schedule A$
Not tax deductible β for cash flow only A$0
Annual Tax Refund (ATO subsidy)
A$0
Rental Loss (tax deductible)
A$0
Net Annual Cash Position
0%
Your Marginal Tax Rate
Rental Property Tax Computation
How Negative Gearing Tax Benefits Work
When a property is negatively geared, the rental loss reduces your total taxable income. The ATO effectively subsidises part of your holding costs through a lower tax bill β but you are still out-of-pocket for the remaining loss. The key formula is straightforward.
Tax Benefit Formula
Rental Loss = Rental Income β (All Deductible Expenses inc. depreciation)
Tax Benefit = Rental Loss Γ Marginal Tax Rate
Net Cash Outflow = Rental Loss β Depreciation β Tax Benefit + Mortgage Principal
(Depreciation is added back as it is non-cash)
Tax Benefit = Rental Loss Γ Marginal Tax Rate
Net Cash Outflow = Rental Loss β Depreciation β Tax Benefit + Mortgage Principal
(Depreciation is added back as it is non-cash)
Example: A$120K income, A$6,000 rental loss
Rental income: A$24,000 | Total deductible expenses: A$43,000
Rental loss: A$43,000 β A$24,000 = A$19,000
Marginal rate at A$120K: 37%
Tax benefit: A$19,000 Γ 37% = A$7,030 refund
But still out-of-pocket for A$19,000 β A$7,030 = A$11,970 per year (excluding depreciation benefit)
Rental loss: A$43,000 β A$24,000 = A$19,000
Marginal rate at A$120K: 37%
Tax benefit: A$19,000 Γ 37% = A$7,030 refund
But still out-of-pocket for A$19,000 β A$7,030 = A$11,970 per year (excluding depreciation benefit)
Extended
Positive vs Negative Gearing Cash Flow Comparison
Side-by-side cash flow analysis β net position with and without the property over multiple yield scenarios
Full cash flow comparison β your financial position with and without the investment property. Includes the non-cash depreciation benefit in tax, but shows real cash movement separately.
| Item | Without Property | With Property | Difference |
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Yield Scenarios β Net Cash Position at Different Rent Levels
| Weekly Rent | Annual Rent | Rental Result | Tax Benefit | Net Cash/Year |
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Frequently Asked Questions
What is negative gearing in Australia?
Negative gearing occurs when the costs of owning a rental property β mortgage interest, depreciation, maintenance, management fees, rates, and insurance β exceed the rental income. The resulting loss can be deducted against your other income (e.g., salary), reducing your overall taxable income and creating a tax refund. Australia is one of the few countries that allows this broad offset against non-rental income, making it a popular investment strategy.
How is the tax benefit of negative gearing calculated?
The tax benefit equals the rental loss multiplied by your marginal tax rate. For example, a $10,000 rental loss at a 37% marginal rate saves $3,700 in tax. However, this is only a partial offset β you are still out-of-pocket for the remaining $6,300 of the loss. The hope is that capital growth will eventually outweigh the ongoing cash outflow. At a 45% marginal rate, the ATO effectively subsidises 45 cents of every dollar lost.
What expenses can I claim for a rental property?
Immediately deductible: mortgage interest, property management fees, landlord insurance, council rates, water rates, land tax, repairs and maintenance, advertising for tenants, stationery and accounting. Capital works deduction (2.5%/year for 40 years on construction costs post-September 1987). Depreciation on plant and equipment (assets like carpets, appliances β subject to rules for properties bought after 9 May 2017 where only new assets qualify for depreciation claims by investors).
What is the difference between negative gearing and positive gearing?
Negative gearing: rental expenses exceed rental income β creates a tax-deductible loss β ATO partially subsidises holding cost β relies on capital growth for profit. Positive gearing: rental income exceeds expenses β generates taxable profit β no ATO subsidy but provides positive cash flow β can work in high-yield, lower-growth markets. Which is better depends on your income tax rate, the property market, and your cash flow needs. High-income earners benefit most from negative gearing due to their higher marginal rates.
Can I claim depreciation on a second-hand property bought after 2017?
As of 1 July 2017, investors purchasing second-hand residential properties cannot claim depreciation deductions on existing plant and equipment (carpets, appliances, blinds etc). This change applies to properties where the contract was exchanged after 9 May 2017. Capital works (the building structure and fixed assets) can still be claimed at 2.5%/year if the construction started after 15 September 1987. New properties are not affected β investors can still claim depreciation on new plant and equipment.