What is negative gearing?

Negative gearing occurs when the costs of owning an investment property (including loan interest, rates, insurance, and management fees) exceed the rental income. The resulting loss can be deducted against other income (like your salary), reducing your overall tax bill.

How much tax do you save from negative gearing?

Your tax saving equals your annual property loss multiplied by your marginal tax rate. For example, a $10,000 annual loss at a 37% marginal rate saves $3,700 in tax — reducing your effective out-of-pocket cost from $10,000 to $6,300.

Is negative gearing worth it?

Negative gearing makes sense when expected capital growth exceeds the after-tax cash flow shortfall. In markets with strong capital growth, the tax benefit plus appreciation can outweigh the ongoing loss. However, it involves real cash outgoings and risk if the property doesn't grow in value.

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Negative Gearing Calculator

Calculate the annual loss, tax benefit, and true out-of-pocket cost of a negatively geared investment property.

Weekly Rent

Loan Amount

Interest Rate (%)

Annual Expenses (rates, insurance, management, maintenance)

Your Marginal Tax Rate

32.5% 37% 45%

Annual Tax Benefit

Annual Property Loss

After-Tax Cash Flow

Annual Rental Income

Annual Interest Cost

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How Negative Gearing Works

An investment property is negatively geared when the deductible costs exceed the rental income. The resulting loss is used to offset your taxable income from other sources (usually your salary), reducing the income tax you pay.

What Costs Are Deductible?

Loan interest (the largest expense for most investors)
Property management fees
Council rates and water rates
Landlord insurance
Maintenance and repairs (not capital improvements)
Depreciation on building structure (Div 43) and fittings (Div 40)
Accounting fees related to the property

Note: Capital improvements (extensions, new kitchens) are not immediately deductible — they are added to the cost base and depreciated or recouped at sale.

The Real Cost After Tax

If your property loses $15,000 per year and you're in the 37% tax bracket, you save $5,550 in tax. Your real out-of-pocket cost is only $9,450 — but you still need $15,000 in cash flow to cover the costs. Negative gearing reduces the pain but doesn't eliminate it.

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Frequently Asked Questions

What's the difference between negative and positive gearing?

Positively geared properties generate more rental income than costs — they produce taxable income but positive cash flow. Negatively geared properties cost more to hold than they earn in rent — they produce a tax deduction but require ongoing cash contributions. Which is better depends on your financial position, tax rate, and growth expectations.

Is negative gearing only available in Australia?

Most countries allow deductions for investment property losses, but Australia's system is notable because losses can be offset against unrelated income (your salary) in the same year, rather than only against future rental income. This "unlimited loss deductibility" is what makes negative gearing particularly powerful for high-income Australians.

What happens to negative gearing when I sell?

When you sell a negatively geared property at a profit, the capital gain is added to your income for the year of sale (with the 50% discount if held over 12 months). The years of tax deductions effectively reduce your cost base by the amount of depreciation claimed (recaptured at sale).

Disclaimer: This calculator uses simplified estimates. Actual tax deductibility depends on your specific expenses, depreciation schedule, and ATO rules. This is not financial or tax advice. Consult a registered tax agent and financial adviser before making property investment decisions.

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Negative Gearing Calculator

How Negative Gearing Works

What Costs Are Deductible?

The Real Cost After Tax

Frequently Asked Questions

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