Negative Gearing Calculator

How Negative Gearing Works

When your investment property expenses exceed the rental income, you have a net rental loss. In Australia, this loss reduces your overall taxable income — meaning you pay less tax on your salary and other income. The tax saving depends on your marginal tax rate: at 37% + Medicare, you save 39 cents per dollar of rental loss.

Over time, rent typically grows faster than fixed expenses, so most negatively geared properties eventually become positively geared. This calculator projects that transition year-by-year so you can plan your cash flow.

For a detailed year-by-year depreciation schedule combining Div 43 capital works and Div 40 plant & equipment, see our Property Depreciation Calculator.

When Does Negative Gearing Make Sense?

Negative gearing is most effective when:

• High marginal rate (37%+): You recover more of the rental loss through tax savings
• Strong capital growth expectations: The after-tax cost is the price of exposure to property appreciation
• Long holding period: Short-term negative gearing without capital growth is just a cash drain
• Stable employment income: You need the salary to fund the shortfall and claim the deduction

At lower marginal rates (16–19%), the tax benefit is small relative to the cash outlay. Use the calculator above to see the exact numbers for your situation.

Interest-Only vs Principal & Interest

Most property investors start with interest-only (IO) loans for 5–10 years:

• IO maximises the deductible interest portion — all your repayment is interest
• P&I repayments include principal (not deductible), reducing your tax benefit
• IO keeps your cash outflow lower in the early years when the property is most negatively geared

The trade-off: IO doesn't reduce your loan balance, so you're relying on capital growth alone for equity. Use the "IO then P&I" option in the calculator to model the transition. See our mortgage calculator for detailed repayment analysis.

Frequently asked questions