Why use this calculator
Negative gearing is a widely-used investment strategy in Australia where property investors offset rental losses against their taxable income to reduce their overall tax liability. This calculator helps you understand the true after-tax cost of holding a negatively geared investment property, which is essential for evaluating whether the tax benefit and expected capital growth justify the ongoing out-of-pocket expense.
How to use it
Enter your weekly rental income, annual mortgage interest payments, annual property expenses (rates, insurance, management fees, maintenance), and your marginal tax rate. The calculator determines whether the property is negatively geared and shows the tax benefit and true after-tax cost of holding the investment.
The formula
Net Rental Income = (Weekly Rent x 52) - Mortgage Interest - Expenses. If negative: Tax Benefit = |Net Rental Income| x Marginal Tax Rate. After-Tax Cost = |Net Rental Income| - Tax Benefit.
Worked examples
$550/week rent, $32,000 interest, $8,000 expenses at 37% tax rate
Net loss of $11,400, tax refund of $4,218, after-tax cost of $7,182/year ($138/week)
$450/week rent, $28,000 interest, $6,000 expenses at 32.5% tax rate
Net loss of $10,600, tax refund of $3,445, after-tax weekly cost of approximately $138
When people use it
- Evaluating the true cost of holding a negatively geared property
- Comparing investment properties with different rental yields
- Tax planning and estimating refunds from property investments
- Deciding whether negative gearing makes sense at your tax bracket
Tips
- Negative gearing benefits increase with higher marginal tax rates
- The strategy relies on capital growth exceeding the after-tax holding costs over time
- Keep detailed records of all property expenses for tax deduction claims
- Consider depreciation as an additional non-cash deduction that can increase your tax benefit
Questions people ask
- What is negative gearing?
- Negative gearing occurs when the costs of owning an investment property (mortgage interest, expenses, depreciation) exceed the rental income it generates. The net loss can be deducted from your other taxable income, effectively reducing your overall tax bill.
- Is negative gearing always beneficial?
- Not necessarily. Negative gearing means you are making a loss on the property in the short term, hoping that capital growth will more than compensate over time. If property values stagnate or fall, you may end up worse off. It works best in growing markets and for investors in higher tax brackets.
- What expenses can I claim?
- Deductible expenses include mortgage interest, council and water rates, property management fees, insurance, repairs and maintenance, depreciation of fixtures, and travel to inspect the property. Capital improvements are claimed over time through depreciation rather than immediately.