Negative Gearing Calculator

Current 2025–26 tax rates

Negative Gearing Calculator

See your tax refund from a rental loss — and your true out-of-pocket cost after depreciation.

An investment property is negatively geared when its deductible costs exceed the rent it earns. That rental loss is subtracted from your other taxable income, cutting your tax bill — which is why investors talk about "getting money back." But the headline refund hides two things most calculators miss: depreciation is a paper deduction that boosts your refund without costing you a cent of cash, and your real out-of-pocket cost is the cash shortfall minus that refund. This calculator shows all of it. Enter your numbers below.

$
Your income before the rental property is taken into account.
Please enter your salary / other income to calculate.
$
Total rent received for the year.
$
Money you actually pay out during the year.
$
Paper deductions from a depreciation schedule. Enter 0 if none.
Estimated tax refund from negative gearing
$0
The tax saved by deducting your rental loss.
Net rental loss (tax)
$0
Cash shortfall
$0
Real out-of-pocket cost
$0
Effective weekly cost
$0
!

Missing income figure

Please enter your salary or other taxable income before calculating — it's the required field.

How negative gearing is calculated

Your total deductible expenses (cash costs plus depreciation) are added up and offset against your rental income. If the deductions are larger, you have a net rental loss. That loss comes off your other taxable income, so you pay tax on a smaller amount — and the difference is your refund. Because Australia's tax is progressive, the refund is worth your marginal rate, which this tool calculates bracket-by-bracket including the 2% Medicare levy.

The negative gearing formula
Net rental loss = (cash expenses + depreciation) − rental income
Tax refund = tax(salary) − tax(salary − net rental loss)
Cash shortfall = cash expenses − rental income (depreciation excluded)
Real out-of-pocket = cash shortfall − tax refund
Worked example — salary $110,000, rent $26,000, cash costs $34,000, depreciation $6,000. Net rental loss = $40,000 − $26,000 = $14,000. Refund ≈ $4,480 (32% marginal). Cash shortfall = $8,000. Real out-of-pocket ≈ $3,520 a year.

Why depreciation is the secret weapon

Depreciation and capital works are deductions you claim without spending cash that year — the building and fittings are wearing out on paper. They enlarge your tax loss (boosting your refund) but don't add to your cash shortfall. That's why two properties with identical cash flow can have very different real costs: the one with a strong depreciation schedule hands back more tax. This calculator separates cash from non-cash so you can see that effect clearly.

Negatively, neutrally or positively geared?

  • Negatively geared: deductions exceed rent — you make a tax loss and claim a refund, but fund a shortfall.
  • Neutrally geared: deductions roughly equal rent — little tax effect either way.
  • Positively geared: rent exceeds deductions — the property makes a profit, which is taxable, so there's extra tax to pay rather than a refund.

Don't forget capital gains

Negative gearing only makes sense if the property's capital growth outweighs the holding cost over time. You're funding an annual loss in the hope of a larger gain on sale. Model the upside with the capital gains tax calculator, check your serviceability with the borrowing power calculator, and run the loan itself through the mortgage calculator. Your rental loss also feeds your income for Medicare Levy Surcharge purposes, where it's added back.

ItemAffects tax loss?Affects cash?
Loan interestYesYes
Rates, insurance, managementYesYes
Repairs & maintenanceYesYes
Depreciation & capital worksYesNo (paper only)
Loan principal repaymentsNoYes

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Frequently asked questions

What is negative gearing in simple terms?+
It's when your investment property costs more to hold than it earns in rent. The shortfall is a tax-deductible loss that reduces your other taxable income, so you pay less tax. You're effectively subsidising the loss now, betting that capital growth will more than make up for it later.
How much tax do I get back from negative gearing?+
Your refund equals your net rental loss multiplied by your marginal tax rate (plus the 2% Medicare levy). On a $14,000 loss at a 32% effective marginal rate, that's about $4,480 back. The higher your income bracket, the larger the refund on the same loss.
Why is my real cost less than my cash shortfall?+
Because the tax refund offsets part of the cash you put in. Your cash shortfall is what you pay out of pocket before tax; subtract the refund and you get your true annual cost. Depreciation widens the gap because it boosts the refund without adding to the cash shortfall.
Does depreciation really cost me nothing?+
In cash terms during the year, correct — it's a non-cash deduction for the building and fittings wearing out. It increases your tax refund without you spending anything extra. The trade-off comes later: claimed depreciation reduces your cost base and can increase capital gains tax when you sell.
What if my property is positively geared?+
Then it makes a taxable profit rather than a loss. There's no negative gearing refund — instead the net rental profit is added to your income and taxed at your marginal rate. The calculator will tell you if you're positively geared and show the extra tax instead.
Could negative gearing rules change?+
Reform has been raised in political debate, including around the 2026–27 Budget, but this calculator is built on the current law that applies for 2025–26. If rules change in a future year, the tax treatment of rental losses could differ. Always check the latest ATO guidance before investing.
Is negative gearing a good strategy?+
It depends on whether expected capital growth exceeds the after-tax holding cost over your timeframe, plus your income, risk tolerance and cash flow. A tax refund alone doesn't make a property a good investment — you're still losing money each year. This tool quantifies the cost; weigh it against the potential gain and get personal advice.
This calculator provides general estimates only and is not financial, tax or investment advice. It uses 2025–26 Australian resident tax rates plus the 2% Medicare levy and assumes the rental loss is fully deductible against your other income under current law. It does not model capital gains tax, the Medicare levy surcharge, co-ownership splits, LITO, or potential future changes to negative gearing rules. Confirm your position with a registered tax agent or financial adviser.

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