Model an Australian investment property using 2025-26 or 2026-27 tax settings: purchase costs, loan repayments, expenses, depreciation, after-tax cash flow and a long-term before-sale-CGT position.
Actual expense inputNegative gearingProjection + ETF
A sale after 1 July 2027 can require CPI cost-base indexation, transitional gain allocation and the 30% minimum capital-gains tax. The projected property and ETF positions therefore exclude sale CGT instead of applying the superseded 50% discount to the whole gain.
Yr
Rent
Interest
Deprec.
Rental result
Tax change
After-tax /wk
Property value
Equity
1
$27,500.00
$35,800.00
$10,250.00
−$34,550.00
−$11,056.00 tax
−$396.00
$832,000.00
$239,368.00
2
$28,325.00
$35,345.00
$9,450.00
−$32,470.00
−$10,390.00 tax
−$393.00
$865,280.00
$280,471.00
3
$29,175.00
$34,863.00
$8,810.00
−$30,498.00
−$9,759.00 tax
−$389.00
$899,891.00
$323,387.00
4
$30,050.00
$34,350.00
$8,298.00
−$28,598.00
−$9,151.00 tax
−$384.00
$935,887.00
$368,200.00
5
$30,951.00
$33,807.00
$7,888.00
−$26,743.00
−$8,562.00 tax
−$378.00
$973,322.00
$414,996.00
6
$31,880.00
$33,229.00
$7,561.00
−$24,910.00
−$8,259.00 tax
−$366.00
$1,012,255.00
$463,867.00
7
$32,836.00
$32,616.00
$7,299.00
−$23,078.00
−$7,965.00 tax
−$353.00
$1,052,745.00
$514,909.00
8
$33,822.00
$31,965.00
$7,089.00
−$21,233.00
−$7,675.00 tax
−$340.00
$1,094,855.00
$568,221.00
9
$34,836.00
$31,275.00
$6,921.00
−$19,359.00
−$7,386.00 tax
−$326.00
$1,138,649.00
$623,908.00
10
$35,881.00
$30,541.00
$6,787.00
−$17,447.00
−$6,804.00 tax
−$317.00
$1,184,195.00
$682,081.00
Sale CGT is not estimated because a sale on or after 1 July 2027 can involve cost-base indexation, the 30% minimum capital-gains tax and transitional gain allocation. Ending positions are shown before sale CGT.
Want the long-term picture? Our Negative Gearing Calculator projects your position over 10–30 years, including breakeven year and ETF comparison.
How negative gearing works
Negative gearing occurs when deductible rental-property amounts exceed assessable rent. Through 2026-27, an eligible loss may reduce other taxable income. From 2027-28, this purchase model treats new homes as an exception and quarantines excess deductions for an established residential home bought after the statutory cutoff.
Estimated tax effect = Tax without property − tax after rental result
Shortcut example: A $10,000 loss wholly within a 32% income-tax-plus-Medicare band is approximately $3,200. Thresholds and offsets can change this.
The following is a marginal-rate shortcut only; the calculator uses the full before-and-after tax difference:
Taxable income
Rate incl. Medicare
Approx. effect per $10k loss
$45,001 – $135,000
32%
$3,200
$135,001 – $190,000
39%
$3,900
$190,001+
47%
$4,700
What expenses can you claim?
Immediately deductible
→Loan interest: Interest on your investment loan (not principal repayments)
→Council & water rates: Annual rates and service charges
→Insurance: Building, landlord, and contents insurance
→Property management: The actual agent fees attributable to the rental
→Repairs & maintenance: Fixing existing items to their original condition
→Body corporate: Strata fees for units and townhouses
→Land tax: State-based tax on investment property land value
→Advertising & cleaning: Costs to find tenants; cleaning between tenancies
Depreciation (non-cash deductions)
→Capital works (Division 43): Building structure depreciation at 2.5% per year
→Plant & equipment (Division 40): Fixtures, appliances, carpets etc.
Tip: Use a quantity surveyor's depreciation schedule where appropriate rather than treating the purchase price as construction cost. The ATO distinguishes capital works from eligible depreciating assets, and second-hand residential assets can be restricted.
Worked example — $100k income, $550/week rent
Sarah earns $100,000 and owns an investment property rented at $550/week. Here's her annual position:
Item
Amount
Rental income (50 weeks × $550)
$27,500
Loan interest
−$24,000
Council rates
−$2,400
Water rates
−$1,100
Insurance
−$1,800
Property management (7.5%)
−$2,063
Repairs
−$1,500
Depreciation
−$6,000
Total expenses
−$38,863
Net rental loss
−$11,363
Tax benefit ($11,363 × 32%)
$3,636
Sarah's cash expenses (excluding depreciation) are $32,863. With rent of $27,500, her cash shortfall is $5,363. After the $3,636 tax benefit, her after-tax cost is just $1,727/year ($33/week).
Cash position vs tax loss
Depreciation is a "paper loss" — it reduces your taxable income without costing you actual cash. This makes your tax loss larger than your cash loss, increasing your tax benefit.
Type
What it includes
Impact
Cash flow
Rent received minus cash expenses paid
Money in/out of your bank
Tax loss
Cash expenses plus depreciation
Deductions on your tax return
FAQ
What is negative gearing?
Negative gearing occurs when deductible rental property expenses exceed rental income. Through 2026-27, an eligible rental loss may reduce other taxable income. From 2027-28, affected established residential property acquired after the 12 May 2026 cutoff has excess deductions quarantined and carried forward. The calculator derives the treatment from whether the modelled purchase is a new or established home.
What expenses can I claim on a rental property?
Deductible expenses include: loan interest (not principal), council and water rates, insurance, property management fees, repairs and maintenance, body corporate fees, land tax, advertising for tenants, cleaning, gardening, pest control, and depreciation of the building and fixtures.
How much tax will I save with negative gearing?
It depends on where the rental loss moves your taxable income. This calculator uses the before-and-after difference in resident income tax, LITO and the individual Medicare levy. Family Medicare thresholds, HELP repayment income and other offsets can change the final assessment.
What is depreciation and how do I claim it?
Depreciation is a non-cash deduction for the wear and tear of your property's building (capital works at 2.5% per year) and fixtures like appliances and carpets. You need a quantity surveyor's depreciation schedule to claim these deductions.
Should I negatively gear a property?
Negative gearing provides tax benefits but you're still losing money overall. The strategy relies on capital growth to make up for ongoing losses. Consider your cash flow, risk tolerance, and whether the property will grow in value.
Can I claim loan principal repayments?
No, only the interest portion of your loan repayments is tax-deductible. Principal repayments are not deductible as they're building your equity in the property.
Tax Accuracy & Sources
Reviewed: 17 July 2026 · Tax year: 2026-27
Models purchase costs, loan cash flow, entered or benchmark annual expenses, simplified Div 43 and Div 40 depreciation, resident income tax after LITO and individual Medicare levy, and the legislated 2027-28 residential loss quarantine for a modelled current purchase. For projected sales after 1 July 2027, positions exclude sale CGT because indexation, transitional gain allocation and the 30% minimum tax need a separate calculation. It does not model ownership shares, private-use apportionment, family Medicare thresholds, HELP repayment income, residential capital gains available to absorb quarantined losses or personalised deduction eligibility.