Negative Gearing Calculator 2026-27
Working out whether negative gearing makes financial sense.
Calculate the tax benefits of negative gearing on an Australian investment property. Shows rental shortfall, tax deduction at your marginal rate, after-tax holding cost, and break-even rent. ATO 2026-27.
Estimates only. Tax outcome depends on your total income, deductions, and ATO assessment.
How negative gearing works in Australia
What is negative gearing?
A property is negatively geared when total costs (interest, rates, insurance, maintenance, depreciation) exceed rental income. The rental loss offsets other income, reducing your taxable income and generating a tax benefit each year.
The formula
Rental income − rental expenses = net rental loss. Multiply the loss by your marginal tax rate to get the annual tax saving. True weekly cost = (annual shortfall − annual tax saving) ÷ 52.
How your marginal tax rate determines the negative gearing benefit
Higher income = larger benefit
Tax saving = rental loss × marginal rate. At 37% rate on $12,000 annual loss, saving = $4,440/yr ($85/wk).
| Marginal rate | $10k loss | $15k loss |
|---|---|---|
| 15% | $1,500/yr | $2,250/yr |
| 30% | $3,000/yr | $4,500/yr |
| 37% | $3,700/yr | $5,550/yr |
| 45% | $4,500/yr | $6,750/yr |
How Division 43 and 40 depreciation amplifies the tax benefit
Non-cash deduction
Depreciation increases your rental loss without any extra cash outlay. Div 43 (building at 2.5%/yr for 40 years) and Div 40 (plant and equipment) can add $5,000–$15,000+ to annual losses on a new property, significantly amplifying the tax benefit.
QS schedule required
ATO requires a quantity surveyor depreciation schedule to claim Div 43 and most Div 40. Costs $500–$800 (tax-deductible) and pays for itself many times over.
After-tax weekly cashflow on a negatively geared property
The real weekly holding cost
True weekly cost = (annual shortfall − annual tax saving) ÷ 52. This is the actual cash drain from your salary each week. As rents rise over time and mortgage principal decreases, most properties eventually reach neutral or positive gearing.
Negative gearing worked examples by tax bracket 2026-27
Assumes $650,000 investment property, $585,000 loan at 6.5% interest-only, $26,000 annual rent (4% gross yield), $7,500 cash expenses (council, insurance, agent, repairs), $9,000 building depreciation.
| Marginal rate | Annual loss | Tax saving | Net after-tax cost | Weekly cost |
|---|---|---|---|---|
| 15% | $28,525 | $4,279 | $24,246 | $466 |
| 30% | $28,525 | $8,558 | $19,967 | $384 |
| 37% | $28,525 | $10,554 | $17,971 | $346 |
| 45% | $28,525 | $12,836 | $15,689 | $302 |
The higher your marginal rate, the more the ATO subsidises your loss. A 45% marginal rate earner pays $164/week less than a 15% earner on the same property — which is why negative gearing is most popular with high-income earners.
Property depreciation that powers negative gearing
Division 43 — capital works (building)
For residential buildings constructed after 15 September 1987, owners can deduct 2.5% of the building cost (not land) per year for 40 years. On a $400,000 building (typical for a recently built 3-bedroom house, separate from land value), that's $10,000/year of depreciation. This is a paper deduction — no cash flows out — making it the most powerful tax tool for property investors.
Division 40 — plant & equipment (fittings)
Carpet, blinds, dishwashers, air conditioners, hot water systems and similar items depreciate over their effective life. For properties acquired after 9 May 2017, investors can only claim Division 40 on items they personally installed (not items that were already in the property when purchased). This 2017 change significantly reduced depreciation deductions for second-hand property investors.
Quantity surveyor's depreciation schedule
To maximise legal depreciation claims, engage a quantity surveyor to prepare a Tax Depreciation Schedule. Cost is typically $500-$700 and is fully tax-deductible. For a newer property, the first-year deduction often exceeds $15,000 — a 30% marginal rate earner saves $4,500/year in tax for around $600 of one-off fee.
Trap: recapture on sale
Depreciation reduces your CGT cost base, so the eventual capital gain is higher when you sell. Don't think of depreciation as "free money" — it's a timing benefit that defers tax until sale. Use our capital gains tax calculator to model the recapture impact.
When does a negatively geared property become positively geared?
Typical 5-7 year trajectory
For a typical 4% gross yield property bought in 2026-27 with full borrowing, the property usually becomes neutral around year 4-5 and positively geared by year 7-9, assuming rent grows ~3.5% p.a. and the loan rate is stable.
| Year | Rent ($) | Loan interest | Pre-tax loss | Status |
|---|---|---|---|---|
| 1 | 26,000 | 38,025 | (28,525) | Negatively geared |
| 3 | 27,840 | 38,025 | (26,685) | Negatively geared |
| 5 | 29,810 | 38,025 | (24,715) | Negatively geared |
| 7 | 31,920 | 38,025 | (22,605) | Negatively geared |
| 10 | 35,355 | 38,025 | (19,170) | Negatively geared |
| 15 | 42,015 | 38,025 | (12,510) | Reducing loss |
| 20 | 49,930 | 38,025 | (4,595) | Near-neutral |
| 25 | 59,335 | 38,025 | +4,810 | Positively geared |
The crossover happens faster if you make P&I (principal & interest) repayments instead of interest-only, as the loan balance shrinks each year. Most investors use interest-only initially to maximise the tax deduction, then switch to P&I later.
Risks and downsides of negative gearing
Interest rate sensitivity
A 1% rate rise on a $585,000 loan adds $5,850/year to your loss — about $112/week extra. The 2022-23 RBA rate cycle pushed many negatively geared landlords into 'mortgage stress' territory. Stress-test your portfolio at +3% rates before relying on the strategy.
Vacancy and tenant risk
Each week of vacancy costs 1/52 of the annual rent — about $500/week on a $26,000 rent. Bad tenants can also cause damage costing thousands. Build in 4-6 weeks of vacancy per year when modelling cashflow.
Capital growth uncertainty
The whole strategy depends on capital growth outpacing the after-tax holding cost. If you buy in a market that flattens for 5-10 years (parts of regional WA and NT after the mining boom; some apartments post-COVID), you can lose money in real terms despite the tax benefits.
Government policy risk
The 2019 ALP election promised to restrict negative gearing to new builds. While defeated, this remains a long-term policy risk — Greens and some Labor factions still propose changes. Future restrictions would not retrospectively grandfather existing properties in most proposals.
Forced sale at the wrong time
If you must sell in a market downturn (job loss, divorce, illness), you may crystallise losses that no tax saving can recover. Negative gearing only works if you can hold through cycles. Maintain a 6-month emergency fund covering loan payments before entering the strategy.
Alternative investment structures: trusts, companies, SMSFs
Individual ownership (most common)
Simplest. Negative gearing losses reduce your personal taxable income at your marginal rate. CGT discount of 50% on sale after 12 months. Capital gain is taxed at your then-current marginal rate.
Family discretionary trust
Trust income can be distributed to family members with lower marginal rates. However, a trust cannot distribute losses — negative gearing losses become 'trapped' inside the trust until the property generates positive income. This makes trusts unsuitable for genuine negative gearing.
Unit trust or company
Companies pay 25% (small business) or 30% tax on rental income, with losses still trapped within the entity. CGT discount is not available to companies. Useful for some commercial property strategies but rarely for residential negative gearing.
Self-managed super fund (SMSF)
An SMSF can hold property and borrow via a Limited Recourse Borrowing Arrangement (LRBA). Tax on rental income is 15% (10% on capital gain after 12 months). However, you cannot personally use the tax loss in your individual return — the loss stays in the SMSF and reduces other super income (typically also taxed at 15%).
Joint ownership
Spouses on different marginal rates often hold property jointly. Income and deductions are typically apportioned by ownership share. If one spouse is on 45% and the other on 30%, having the higher earner own a larger share maximises negative gearing benefit — but may also concentrate capital gains in the higher-tax person at sale.
Recent reforms affecting negative gearing in Australia
9 May 2017 — Travel expense deductions removed
Travel expenses to inspect investment properties (flights, accommodation, meals) are no longer deductible for residential rental properties. Many investors used to claim weekend trips disguised as inspections — this loophole closed entirely.
9 May 2017 — Second-hand depreciation restricted
Plant and equipment in properties purchased after this date cannot be depreciated if it was acquired second-hand. Only items the investor personally installs qualify for Division 40 depreciation.
1 July 2019 — Vacant land deductions restricted
Deductions for vacant land holding costs (interest, rates, etc.) are no longer claimable until construction is complete and the property is genuinely available for rent. This closed a major loophole for land-banking investors.
2024 NSW Foreign Owner Surcharge Land Tax doubled
While not directly affecting Australian negatively geared investors, foreign-owned investment properties in NSW saw their annual surcharge land tax double to 4% — making cross-border negative gearing far less viable.
Future policy risk
The 2024-25 federal Budget and Senate committees continue to debate housing affordability measures. Possible future changes include restricting negative gearing to new builds, capping interest deductions, or limiting the CGT discount. None are currently legislated but the political pressure persists.
❓ Frequently asked Frequently asked questions about negative gearing
Is negative gearing still available in 2025?
Yes. Negative gearing remains fully available in 2026-27 for all investment properties. The 2019 proposal to restrict it to new properties was never legislated.
What expenses can I claim?
Deductible expenses include: loan interest, property management fees, council and water rates, landlord insurance, repairs and maintenance, depreciation (Div 43 and 40), body corporate fees, and accounting fees.
Does negative gearing mean I lose money overall?
Not necessarily. The aim is for capital growth to exceed the after-tax holding cost. Whether it is profitable depends on capital growth outpacing the true weekly cost over your ownership period.
Can I negatively gear shares?
Yes. Shares and other income-producing investments can also be negatively geared — borrowing to invest and deducting interest against income.
How much tax do I get back from negative gearing?
Your annual tax saving equals your annual loss × your marginal tax rate. A $20,000 loss at the 37% marginal rate returns $7,400 from the ATO. The same loss at the 15% marginal rate returns only $3,000 — high-income earners benefit most.
Can I negatively gear my own home?
No. Your principal place of residence is not income-producing, so the interest is not deductible. Negative gearing requires the property to be genuinely available for rent at market rates. Some investors use a 'rentvest' strategy — renting where they want to live and owning a separate negatively geared investment property.
What's the difference between negative and positive gearing?
Negative gearing: rental income less than expenses (you make a loss). Positive gearing: rental income greater than expenses (you make a profit). Positive gearing increases your taxable income; negative gearing decreases it. Most new investment properties start negatively geared and become positive as rents grow.
How does negative gearing affect my tax return?
The rental loss is reported on the rental schedule of your tax return and reduces your overall taxable income. Your tax refund (or reduced tax bill) is calculated as part of your normal return — there is no separate negative gearing refund mechanism. PAYG variation can let you receive the benefit during the year via lower withholding.
Can I use depreciation if I bought a second-hand property?
You can claim Division 43 building depreciation on any residential property built after 15 September 1987, regardless of when you bought it. Division 40 (plant and equipment) is restricted — for purchases after 9 May 2017, you can only claim Division 40 on items you personally installed.
When does a negatively geared property become profitable?
Typically 5-9 years for a 4% gross yield property bought with full borrowing in 2026-27, assuming rent grows 3-3.5% annually and interest rates remain stable. Sooner if you make P&I repayments; longer if rates rise.
Is negative gearing risky?
Yes. Key risks: interest rate rises (a 1% rise adds ~$100/week to costs on a $580k loan), vacancy periods, bad tenants, slower-than-expected capital growth, forced sale in a downturn, and future policy changes. Stress-test at +3% rates and 8 weeks vacancy before relying on the strategy.
Can I claim a PAYG variation to get the benefit during the year?
Yes — lodge a PAYG Withholding Variation Application with the ATO showing your expected rental loss and other deductions. The ATO issues a variation notice to your employer who reduces withholding by approximately the marginal rate × annual loss. This gives you the tax benefit as monthly cashflow rather than waiting for the next year's refund.
Where these figures come from
Property and mortgage figures on this page are drawn from the Reserve Bank of Australia (rate data), APRA (serviceability and lending rules), the ATO (CGT and rental rules), and State Revenue Offices (stamp duty).
- Mortgage & variable-rate data — RBA — Lenders' Interest Rates (F6).
- Lending serviceability buffer (3%) — APRA — Prudential Practice Guide APG 223.
- Capital gains tax & main residence — ATO — Capital gains tax.
- Negative gearing & rental income — ATO — Rental properties.
- Stamp duty (NSW example) — Revenue NSW — Transfer duty.
- First Home Owner Grant schemes — FirstHome.gov.au.
Last checked: July 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.
Select the question that matches where you are right now.
Your annual tax saving is the amount by which negative gearing reduces your tax bill each year. It's the rental loss multiplied by your marginal tax rate — a real cash benefit paid back through your tax return or PAYG variation.
Compare your after-tax weekly cost against your target purchase price or a rental-only scenario. If the weekly cost is manageable and you expect capital growth, negative gearing is working as intended. Use Standard mode to model exact expenses.
Not a guarantee of profit. Negative gearing reduces your tax — it doesn't guarantee the property will grow in value. The investment only works if capital growth exceeds the total after-tax holding cost over your ownership period.
All calculations run entirely in your browser. No data is sent to any server. Results reflect your inputs and the assumptions shown — including current ATO 2026-27 marginal rates and the Medicare levy.
Three variables dominate the negative gearing result: your marginal tax rate, the interest rate on the loan, and the gap between rental income and total expenses. Small shifts in any of these can materially change the outcome.
Higher income means a higher marginal rate and a larger tax saving on the same rental loss. At 45% (income over $190k), you get back 45 cents per dollar of loss. At 19% (income under $45k), only 19 cents. This is why negative gearing benefits higher earners more.
Interest is typically the largest single expense. A 0.5% rate rise on a $500k loan adds ~$2,500/year to the rental loss — increasing both the tax saving and the pre-tax holding cost. Use Standard mode to model rate changes.
Building (Div 43) and fittings (Div 40) depreciation can add $5,000–$15,000+ to your annual deductions without any extra cash outlay. A quantity surveyor schedule ($500–$800, tax-deductible) can significantly amplify the tax benefit — especially on newer properties.
To improve your negative gearing position, focus on increasing the tax saving or reducing the after-tax holding cost. These are the highest-leverage moves.
If you haven't ordered a quantity surveyor report, you're likely missing thousands in annual deductions. Div 43 (building at 2.5%/yr) and Div 40 (plant and equipment) are non-cash deductions that directly increase your rental loss and tax saving.
Interest-only repayments maximise the deductible interest component — reducing after-tax cost compared to principal and interest. Ensure the investment loan is not cross-collateralised with your home loan, as mixed-purpose loans can reduce deductibility.
Instead of waiting until tax time for a lump-sum refund, apply to the ATO for a PAYG withholding variation. Your employer withholds less tax each pay cycle, giving you the negative gearing benefit throughout the year — improving weekly cashflow.
Negative gearing is one piece of the investment property picture. These are the natural next steps after reviewing this result.
Your gross and net rental yield determine whether the property is fairly priced relative to the income it generates. A yield below 3% means a larger rental shortfall and higher holding cost.
Rental yield calculator →If the property is relatively new, depreciation can add significantly to annual deductions. Use the depreciation calculator to estimate Div 43 and Div 40 claims before ordering a full quantity surveyor schedule.
Depreciation calculator →When you eventually sell, capital gains tax applies. The CGT discount (50% for assets held over 12 months) significantly reduces the effective rate. Model the tax on a future sale now to understand the full investment picture.
CGT calculator →If you're still in the planning phase, confirm how much a lender would approve you for. The negative gearing shortfall on an existing investment is treated as a monthly commitment in your next loan application.
Borrowing capacity calculator →