Negative Gearing Calculator
Your real after-tax cost of an investment property
Property & loan
Loan type
IO maximises deductions — full interest is deductible each year.
Rental income
Annual expenses
Depreciation (non-cash deduction)
Depreciation is a non-cash deduction — it reduces your tax but costs you nothing each year. A quantity surveyor's report (typically $500–$700) pays for itself many times over.
Your other income
30%
Marginal rate
$9,459
Annual tax benefit
After-tax weekly cost
$155/wk
Out-of-pocket after rent received and $9,459 ATO rebate
Annual breakdown
Yields
Gross rental yield
Rent ÷ property value
Net rental yield
After all expenses incl. depreciation
After-tax yield
After ATO tax benefit, excl. depreciation
Income vs expenses breakdown
Tax comparison — with vs without property
Without property
With investment property
Tax saving
$9,459
30¢ back for every $1 of rental loss
5-Year Projection
Assumes rent +3%/yr, cash expenses +2%/yr (depreciation fixed). Tax benefit recalculated each year.
| Year | Rental Income | Cash Expenses | Tax Benefit | Net Cash | Running Total |
|---|---|---|---|---|---|
| Year 1 | $27,170 | −$44,674 | +$9,459 | −$8,045 | −$8,045 |
| Year 2 | $27,985 | −$45,567 | +$9,485 | −$8,097 | −$16,142 |
| Year 3 | $28,825 | −$46,478 | +$9,509 | −$8,145 | −$24,287 |
| Year 4 | $29,689 | −$47,408 | +$9,531 | −$8,188 | −$32,475 |
| Year 5 | $30,580 | −$48,356 | +$9,550 | −$8,226 | −$40,701 |
Net Cash = Rental income − Cash expenses + Tax benefit (excludes depreciation, which is non-cash). Running Total = cumulative net cash since Year 1.
What is negative gearing?
A property is negatively geared when its rental income is less than the costs of owning it — interest, rates, insurance, management fees, and depreciation. This net loss is deductible against your other income, reducing your tax bill.
The ATO effectively subsidises part of your holding costs. At a 37% marginal rate, every $1 of rental loss saves you 37 cents in tax — meaning the property costs you only 63 cents in the dollar to hold, while you await capital growth.
Depreciation — the biggest missed deduction
Depreciation is a non-cash deduction — it reduces your taxable income without costing you any additional money. There are two types: capital works (building structure, 2.5%/year on construction cost) and plant and equipment (carpets, appliances, hot water system, etc.).
A quantity surveyor's depreciation schedule typically costs $500–$700 and is itself tax-deductible. For newer properties, depreciation can be $8,000–$15,000+ per year.