🇦🇺Australia

🏠 Negative Gearing Calculator

See the true cost of your investment property after tax deductions. Compare rental income vs expenses and calculate your tax saving.

💼 Your Income

$120,000

🏠 Property Details

$650,000
$520,000
6.2%
$550
5.0%

📋 Annual Costs

$2,200
$1,800
7.5%
$2,000
$8,000
$1,500

❓ Frequently Asked Questions

What is negative gearing?

Negative gearing occurs when the costs of owning an investment property (mortgage interest, maintenance, depreciation, council rates, insurance, property management fees) exceed the rental income. The resulting loss can be deducted from your other taxable income, reducing your overall tax bill. It's a widely-used tax strategy in Australia.

How does negative gearing save on tax?

If your investment property costs $3,000/month but earns $2,200/month in rent, you have a $800/month ($9,600/year) loss. If you're on a 37% marginal tax rate, that loss reduces your tax by $3,552/year ($9,600 × 37%). The 'real' out-of-pocket cost is only $6,048 instead of $9,600 — the ATO effectively subsidises part of the loss.

Is negative gearing worth it?

It depends on your tax bracket, expected capital gains, and cash flow. Negative gearing works best when: (1) you're on a high marginal tax rate (37%+), (2) you expect strong capital growth, and (3) you can afford the ongoing cash shortfall. It's not free money — you're still losing cash each month; the tax deduction just softens the blow.

What costs can I claim as deductions?

Common deductible costs include: mortgage interest (not principal), property management fees, council rates, water rates, insurance (landlord), repairs and maintenance, depreciation (building + fixtures), land tax, strata fees, and advertising for tenants. Capital improvements are NOT immediately deductible — they're depreciated over time.

What is the 50% CGT discount?

If you hold an investment property for more than 12 months and sell it for a profit, you only pay capital gains tax on 50% of the gain. For example, if you bought for $500K and sold for $700K, your $200K gain is halved to $100K, which is then added to your taxable income for that year. This is a key reason investors accept short-term losses from negative gearing.

How does depreciation work for investment properties?

Depreciation lets you claim a deduction for the 'wear and tear' of the building and its fixtures. Building (Division 43): built after 1985, 2.5% of construction cost per year for 40 years. Fixtures (Division 40): items like carpet, blinds, appliances — depreciated at varying rates. A quantity surveyor can prepare a depreciation schedule, often saving $5,000-$15,000+ in deductions over the first 5 years.