Negative gearing calculator

Negative gearing is when your investment property loses money each year — the rent it generates is less than the deductible expenses (loan interest, holding costs, depreciation). Under Australian tax law you can use that loss to reduce your other taxable income (your salary, business profits, etc.), which reduces the tax you pay overall. The refund shown by this calculator is that reduction: rental loss × your marginal tax rate.

Three-step formula. (1) Effective rent = weekly rent × (52 − vacancy weeks). (2) Rental loss = effective rent − loan interest − cash holding costs − Div 43 depreciation − Div 40 depreciation. Principal repayments are intentionally excluded — they're not deductible. (3) Refund = max(0, −rental loss) × your marginal tax rate. The refund is floored at zero because the calculator doesn't compute extra tax on positively-geared properties.

Division 43 covers the building shell — bricks, concrete, fixed wiring. It's claimed at 2.5% per year over 40 years on the construction cost (the ATO Capital Works rule). It's straight-line — no method election. Division 40 covers plant and equipment — fixtures, appliances, carpet, blinds. You can elect Prime Cost (straight-line) or Diminishing Value (front-loaded). Both reduce your rental loss, but only Div 43 reduces your CGT cost base when you sell. The calculator handles both separately so you see the real impact.

Negative gearing puts cash back in your pocket in years where you genuinely have a tax loss AND you have other taxable income to offset against. The HIGHER your marginal rate, the bigger the refund — at 45% you get 45c back for every $1 of loss; at 19% you only get 19c. The trade-off is you're paying the LOSS in real cash to get the refund. Most investors plan to recover the negative cashflow via capital growth at sale. If the property doesn't grow in value, the strategy didn't work.

Yes — the loss is split based on legal ownership (usually 50/50 for a couple on the title). Each owner claims their share of the loss against their own marginal tax rate. If one spouse earns far more, you ideally want the property in the higher earner's name to maximise the refund. This calculator models a single owner; for joint ownership, model your share of the inputs (e.g. half the rent, half the interest) and the result is your portion of the refund.

No — the 2026 Budget announcement preserves negative gearing for the existing rental loss → other-income offset. What's changing post-2027 is the Capital Gains Tax treatment at sale (the 50% discount is being replaced with a CPI-indexation model). The calculator's CGT comparison card models both regimes side by side so you can see the impact on the sale outcome. Year-by-year neg-gearing is unaffected.

Two reasons. Rent typically grows each year (the calculator uses your "Rent growth" assumption), which shrinks the loss. And once a P&I loan amortises, the interest portion of each repayment falls — less interest = less deductible expense = smaller loss = smaller refund. Add the Div 40 depreciation tapering (plant items reach end of life over 5–20 years), and a refund that starts at, say, $9k year 1 might be $3k by year 10. The cashflow projection chart shows this curve.

No — the calculator uses only your marginal income tax rate. Real ATO assessable income calculations also apply the 2% Medicare Levy, HELP/HECS repayment thresholds, and the Low Income Tax Offset (LITO). Those interactions can shift the effective refund by ±$500-$2,000 per year. For a final figure, talk to a registered tax agent; this calculator gives the textbook estimate.