What is negative gearing?

It is simply owning an investment that costs more to hold than it earns. When rent is less than interest plus expenses plus depreciation, the loss is deducted against your other income, reducing your tax. The property is still losing money. The deduction returns a portion of that loss at your marginal rate, not all of it.

How much tax do I get back from negative gearing?

Your marginal rate plus the Medicare levy, applied to the loss. On $120,000 of income that is about 32%, so a $20,000 loss returns roughly $6,400. The remaining share is a genuine cost you fund from salary, which is the part that gets overlooked.

Is negative gearing worth it?

Only if capital growth exceeds the after-tax cost of holding the property. The tax deduction makes a loss cheaper; it never makes it a profit. If a property costs $5,000 a year after tax and grows $25,000, the strategy works. If it costs the same and grows $2,000, you have paid for the privilege of owning a stagnant asset.

Can I claim depreciation on an older property?

Partly. Capital works deductions on the building are available where construction began after 17 September 1987. For properties bought after 9 May 2017, deductions for previously used plant and equipment, appliances, carpets, blinds, are no longer available to subsequent owners, though items you buy new yourself still qualify. A quantity surveyor will tell you quickly whether a schedule is worth commissioning.

Does the tax benefit arrive each week or at tax time?

At tax time by default, which creates a cash flow problem because the property costs you money every week while the refund arrives once a year. You can lodge a PAYG withholding variation with the ATO to have less tax withheld from each pay instead, which smooths the cost across the year but requires you to estimate accurately.

What happens to the depreciation I claimed when I sell?

Capital works deductions reduce your cost base, which increases your capital gain on sale. With the fifty per cent discount you effectively repay about half of what you claimed, so the deduction is still worth having. It defers tax for years and returns some of it permanently. It is a timing benefit rather than a free deduction.

Negative Gearing Calculator

Australia· 2026-27

Shows what a negatively geared Australian investment property actually costs each week after the tax deduction, separating cash costs from non-cash depreciation. A $600,000 loan against $600 a week rent typically costs a higher earner around $100 a week after tax.

Enter your values

Weekly rent

Gross rent before agent fees. Use the actual or appraised weekly figure.

Vacancy allowance

weeks

Weeks per year the property sits empty between tenants. Two to four is realistic.

Loan amount

The investment loan balance. Only interest is deductible, not principal repayments.

Interest rate

Your investment loan rate, which is typically higher than an owner-occupier rate.

Annual expenses

Council rates, water, insurance, strata, repairs and property management fees.

Annual depreciation

From a quantity surveyor's schedule. A non-cash deduction. It reduces tax without costing you anything now.

Your taxable income

Salary before the property loss is applied. It sets the marginal rate the deduction is worth.

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Results

Worked example. Edit the values and press Calculate

After-tax cost per week

$161.85

What the property costs you out of pocket each week.

Weekly rent for cash break-even
$904.00
$304.00 a week more than now covers interest and expenses before any tax benefit.
Interest rate for cash break-even
3.67%
At or below this rate the rent covers the interest and other expenses. You pay 6.20%.
Taxable loss (negatively geared)
$21,200
Gross rental income
$30,000
After a 2 weeks vacancy allowance.
Loan interest
$37,200
Other expenses
$8,000
Depreciation claimed
$6,000
A deduction that costs no cash. It reduces the cost base when you sell.
Cash flow before tax
-$15,200
Tax benefit
$6,784
Worth your marginal rate of 30% plus the Medicare levy.
Net annual position after tax
-$8,416

Why use this calculator

Negative gearing is discussed as a tax strategy when it is really a cash flow question. A property that loses money produces a deduction, and the deduction is worth your marginal rate. Which means you are still out of pocket for the rest. Anyone who thinks of the deduction as making the loss free has misunderstood the arithmetic, and that misunderstanding is expensive when rates rise or a tenant leaves.

This calculator separates the three numbers that matter: what the property costs in cash, what the tax deduction returns, and the gap you have to fund from salary every week regardless of what the property is worth.

How to use it

Enter the weekly rent and a realistic vacancy allowance.
Two to four weeks a year is normal, and assuming zero vacancy is the most common way these projections flatter themselves.
The loan amount and interest rate drive the largest expense; note that only interest is deductible, so principal repayments do not appear here even though they leave your account.
Annual expenses cover rates, water, insurance, strata, repairs and management fees.
Depreciation comes from a quantity surveyor's schedule and is the one deduction that costs you nothing now, though it reduces your cost base and increases capital gains tax later.
Your taxable income sets the marginal rate the deduction is worth.

What each result means

Taxable profit (positively geared): Rent exceeds interest and deductible costs, so the property adds this amount to your taxable income each year instead of reducing it.
After-tax cost per week: What you fund from salary each week after the tax refund. This is the number to compare against your budget, not the taxable loss.
Weekly rent for cash break-even: The weekly rent that would cover the loan interest and other expenses with your vacancy allowance, before any tax benefit. Above it the property is cash-flow positive; below it you top it up from your own pocket.
Interest rate for cash break-even: The loan interest rate at which your rent, after expenses, exactly covers the interest. Compare it with your current rate to see how far rates would have to fall, or how much they can rise before the gap widens.
Taxable loss (negatively geared): The deduction applied against your other income. It includes depreciation, so it is larger than your actual cash shortfall.
Gross rental income: Annual rent after allowing for vacancy. Agent commission is counted in expenses rather than deducted here.
Loan interest: The deductible portion of your repayments. Principal is not deductible and is not shown, though it does leave your account.
Other expenses: Rates, water, insurance, strata, repairs and management fees. All deductible in the year they are incurred.
Depreciation claimed: A deduction for the declining value of the building and fittings. It costs no cash now but reduces your cost base, raising capital gains tax later.
Cash flow before tax: Rent minus interest and expenses. The genuine hole in your bank account before any refund.
Tax benefit: What the loss saves you in tax, worth your marginal rate plus the Medicare levy. Higher earners get more from the same loss.
Net annual position after tax: Cash flow plus tax benefit. What the property costs or earns you over a year once everything is counted.

The formula

Rental income is weekly rent multiplied by 52 less vacancy weeks. The taxable result is rental income minus loan interest, minus cash expenses, minus depreciation. When that figure is negative the property is negatively geared and the loss is deducted against your other income, so the tax benefit is the difference between your tax with and without the loss applied. The real weekly cost is cash flow before tax plus the tax benefit, divided by 52. Depreciation is added back because it never left your pocket.

How this number is used in practice

The strategy only works if the property grows in value by more than the after-tax losses you fund. Paying $5,000 a year after tax to hold a property that appreciates $30,000 is a good trade; paying the same to hold one that appreciates $3,000 is not, and the tax deduction does not change which of those you are in. That is the whole question, and it is a growth question rather than a tax one.

Interest rate moves hit geared property harder than owner-occupied. A one percentage point rise on a $600,000 loan adds $6,000 a year of cost, and the deduction returns less than half of it at most marginal rates. Anyone buying at the limit of what they can fund should model a rate two or three points higher before committing.

Depreciation is the most misunderstood line. It reduces your tax now without costing cash, which makes the deduction look better than the cash position. But every dollar claimed reduces your cost base, so it comes back as capital gains tax on sale. With the fifty per cent discount you typically repay about half of it, which still leaves it worthwhile, just not free.

Worked examples

$600 a week rent, $600,000 loan at 6.2%, $120,000 income
Taxable loss around $23,000 including depreciation; after the tax benefit the property costs roughly $100 a week out of pocket.
The same property with rates one point higher
Interest rises by $6,000 while the tax benefit returns under half of it, adding about $70 a week to the real cost.
$750 a week rent on a $500,000 loan, $85,000 income
Close to neutral gearing. $37,500 of rent nearly covers $31,000 of interest and $8,000 of expenses, so the deduction is small and so is the weekly cost.

When people use it

Working out the real weekly cost of holding an investment property
Stress-testing a purchase against higher interest rates before committing
Comparing two properties on after-tax cash flow rather than headline yield
Deciding whether a depreciation schedule is worth commissioning
Checking whether a property has tipped from negative to positive gearing

Tips

Only the interest portion of a repayment is deductible. Principal and interest loans leave a bigger hole in your budget than an interest-only loan at the same rate.
A quantity surveyor's depreciation schedule costs several hundred dollars and typically returns several thousand a year on a newer property. One of the few clear wins available.
Repairs are deductible immediately; improvements are capital and must be depreciated. Replacing a broken fence is a repair, upgrading it to a better one is not.
Assume two to four weeks of vacancy a year. A projection built on 52 weeks of rent is not a projection, it is a best case.
Higher earners get more from the same loss because the deduction is worth their marginal rate. Negative gearing is structurally more attractive at the top brackets.
The tax benefit arrives at lodgement unless you arrange a PAYG withholding variation, which spreads it across your pay packets instead.

What it assumes, and where it stops being accurate

The property is held in a single individual's name. Joint ownership splits both the loss and the benefit by ownership share.
Interest is calculated on the full loan balance for a full year, so an offset account or principal repayments will reduce it in practice.
Depreciation is entered as a single annual figure rather than being modelled as a declining schedule.
The loss is assumed to be fully deductible against other income in the same year, which requires sufficient other income.
Capital growth, selling costs and the eventual capital gains tax are outside this calculation. Use the capital gains calculator for those.
Land tax, which applies to investment property above a state threshold, is not included in expenses unless you add it.

Terms used on this page

Negative gearing: Holding an investment whose costs exceed its income, producing a loss deductible against other income.
Positive gearing: The reverse. Income exceeds costs, so the investment produces taxable profit rather than a deduction.
Depreciation schedule: A quantity surveyor's report setting out the deductions available for the building and its fittings.
Capital works deduction: The annual deduction for the construction cost of a building, usually 2.5% a year for forty years.
PAYG withholding variation: An ATO arrangement reducing tax withheld from your pay to reflect an expected rental loss.

Questions people ask

What is negative gearing?: It is simply owning an investment that costs more to hold than it earns. When rent is less than interest plus expenses plus depreciation, the loss is deducted against your other income, reducing your tax. The property is still losing money. The deduction returns a portion of that loss at your marginal rate, not all of it.
How much tax do I get back from negative gearing?: Your marginal rate plus the Medicare levy, applied to the loss. On $120,000 of income that is about 32%, so a $20,000 loss returns roughly $6,400. The remaining share is a genuine cost you fund from salary, which is the part that gets overlooked.
Is negative gearing worth it?: Only if capital growth exceeds the after-tax cost of holding the property. The tax deduction makes a loss cheaper; it never makes it a profit. If a property costs $5,000 a year after tax and grows $25,000, the strategy works. If it costs the same and grows $2,000, you have paid for the privilege of owning a stagnant asset.
Can I claim depreciation on an older property?: Partly. Capital works deductions on the building are available where construction began after 17 September 1987. For properties bought after 9 May 2017, deductions for previously used plant and equipment, appliances, carpets, blinds, are no longer available to subsequent owners, though items you buy new yourself still qualify. A quantity surveyor will tell you quickly whether a schedule is worth commissioning.
Does the tax benefit arrive each week or at tax time?: At tax time by default, which creates a cash flow problem because the property costs you money every week while the refund arrives once a year. You can lodge a PAYG withholding variation with the ATO to have less tax withheld from each pay instead, which smooths the cost across the year but requires you to estimate accurately.
What happens to the depreciation I claimed when I sell?: Capital works deductions reduce your cost base, which increases your capital gain on sale. With the fifty per cent discount you effectively repay about half of what you claimed, so the deduction is still worth having. It defers tax for years and returns some of it permanently. It is a timing benefit rather than a free deduction.

Use this with

Negative Gearing Calculator answers one part of the question. These pick up where it stops: Property Rental Yield Calculator, Capital Gains Tax Calculator, Investment Property Calculator and Mortgage Calculator.

Where these figures come from

Australia· 2026-27Last reviewed 2026-09·How we build and check calculators

Figures and rules on this page follow Australian law and ATO guidance.

ATO: Tax rates for Australian residents. Income tax brackets for 2026-27
ATO: Study and training loan repayment thresholds and rates. HELP repayment thresholds and the marginal repayment system
ATO: Medicare levy surcharge income thresholds and rates. Surcharge tiers for singles and families
ATO: Super guarantee and contribution caps. SG rate 12% and the maximum contribution base

Negative Gearing Calculator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.