Negative Gearing Calculator 2026
Negative gearing on an Australian investment property: rent, interest, expenses and depreciation, the taxable loss and refund at marginal rates, pre- and after-tax cash flow per week, yields, break-even growth and a 10-year projection with CGT.
| Rental income | — |
|---|---|
| Interest | — |
| Cash expenses | — |
| Non-cash deductions (capital works + plant) | — |
| Taxable rental result | — |
| Tax saved (refund) at your marginal rate | — |
| Pre-tax cash flow | — |
| After-tax cash flow (holding cost) | — |
| Gross and net rental yield | — |
| Capital growth needed to break even | — |
| Projection over the holding period | — |
In short
Negative gearing means a rental property's deductible costs — interest, rates, insurance, management, repairs and depreciation (2.5% of building cost plus plant) — exceed rent, and the loss reduces your taxable income; at a 32–47% marginal rate including Medicare you get that share back at tax time. The strategy relies on capital growth, taxed at half rates on sale after 12 months, exceeding the after-tax holding cost, which on a $750,000 unit with a $600,000 loan is typically $100–150 a week.
Who this is for: Australian property investors assessing a purchase or an existing rental.
Negative gearing explained
- The mechanics: rent − interest − expenses − depreciation = taxable result. A loss comes off your salary; at a 39% marginal rate (37% + Medicare) a $20,000 loss returns $7,800 at tax time, so the net cost is $12,200.
- Depreciation is the sweetener: 2.5% a year of the building cost (built after 1987) plus plant and equipment (new properties only since 2017) is deductible without a cash outlay — a $300,000 build gives $7,500 a year.
- It only works with growth: the after-tax loss must be recovered by capital growth, which is then taxed at half your marginal rate after 12 months. At 4% growth on $750,000 that is $30,000 a year of (unrealised) gain against a $10,000–15,000 holding cost.
- Risks: rate rises (every 1% on $600,000 is $6,000 a year), vacancies, special levies, land tax, and the gearing reversing if your income — and marginal rate — falls.
- Positive gearing (rent covers costs) is taxable income; many investors cross over as rents rise and loans are paid down.
See also: Capital Gains Tax Calculator Australia, Mortgage Payment Calculator (PITI).
Assumptions
- Interest on the loan (interest-only or first-year P&I interest); capital works 2.5% of building cost; plant as entered.
- Taxable result = rent − interest − expenses − depreciation; refund = tax on other income − tax on (income + result).
- 10-year projection: rent and expenses +3% a year, flat interest, plant halved after year 1, CGT at 50% discount on the end gain.
Worked example
Rent $32,500; interest $37,200; expenses $9,500; depreciation $10,500 ($7,500 capital works + $3,000 plant). Taxable loss $24,700 → refund of about $7,904 at 32% (30% + Medicare, as the loss drops income from $130,000). Pre-tax cash flow −$14,200 a year; after the refund the holding cost is about −$6,296 a year (−$121 a week). Gross yield 4.33%, net 3.07%; break-even growth just 0.84% a year. Over 10 years at 4%: capital gain about $360,000, cumulative after-tax cash flow about −$44,400, CGT on sale roughly $79,500 after the discount — net about +$236,000 before selling costs.
Frequently asked questions
How does negative gearing reduce my tax?
A rental loss (expenses and depreciation above rent) is deducted from your other income, so you get back the loss multiplied by your marginal rate — 32–47% including Medicare — at tax time.
Is negative gearing still allowed in 2026?
Yes — losses on residential property remain fully deductible against salary and other income, and the 50% CGT discount still applies after 12 months.
Can I claim depreciation on an established property?
Capital works (2.5% of the construction cost of buildings built after 15 September 1987) yes; plant and equipment only if you bought new or installed the items yourself (since 2017).
What is a good rental yield in Australia?
Gross yields of 3–4.5% are typical in capital cities (units higher than houses), 5–7% regionally; net yield after expenses is usually 1–2 points lower.
Can I claim interest on a redraw?
Only if the redrawn money was used for the investment; using it for personal expenses makes that share non-deductible.
Is land tax deductible?
Yes, as a rental expense in the year it is paid; thresholds and rates vary by state.
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