What is negative gearing in Australia?

Negative gearing means your investment property's total costs (including loan interest) exceed your rental income. The net loss is tax-deductible against your other income, reducing your tax bill. In Australia, this deduction can be claimed in the same income year the loss occurs.

Is negative gearing worth it?

It depends on your tax rate and capital growth expectations. At a 34.5% marginal rate, every $10,000 in losses saves you $3,450 in tax. However, you're still $6,550 out of pocket — so the strategy only makes financial sense if capital growth outweighs the cumulative cash losses over time.

Can I claim all my property expenses as deductions?

Yes — loan interest, property management fees, council rates, water rates, insurance, maintenance, repairs, strata fees, and depreciation are all generally deductible. Capital improvements (not repairs) are usually depreciated over time rather than immediately deductible. Always confirm with your accountant.

What is the break-even rent?

The pre-tax break-even is the weekly rent at which rental income covers all your cash expenses. The after-tax break-even is lower because the ATO effectively subsidises part of your shortfall through the tax deduction — meaning you need less rent to actually break even in real terms.

How does depreciation help with negative gearing?

Depreciation is a non-cash tax deduction for the wear and tear on the property and its fittings. You don't pay it out of pocket, but it increases your deductible losses and therefore your tax saving. A $10,000 depreciation claim at 34.5% is worth $3,450 with no cash outlay required.

Negative Gearing Calculator Australia

Calculate your investment property cash flow, tax benefit and true weekly out-of-pocket cost after the ATO tax deduction. Uses 2025–26 marginal rates.

Property & Loan

Property value

Loan amount

LVR: 80%

Interest rate

Rental Income

Weekly rent

$28,600/yr gross

Management fee

Usually 7–10% of gross rent

Annual Expenses

Council rates

Water & sewage

Landlord insurance

Maintenance & repairs

Strata / body corporate

For units/apartments

Depreciation (optional)

Non-cash deduction — get a QS report

Your Tax Rate

Marginal tax rate (incl. Medicare levy)

Select the bracket matching your total income

Negatively Geared

Weekly cost (pre-tax)

$385

Weekly cost (after tax)

$252

Annual tax saving

$6,911

Gross yield

3.57%

Income & Expenses

Gross annual rent$28,600

Deductible Expenses

Loan interest$40,000

Property management$2,431

Council rates$1,800

Water & sewage$900

Insurance$1,500

Maintenance$2,000

Total expenses$48,631

Net rental loss$20,031

Tax Benefit

Deductible rental loss$20,031

Tax saving at 34.5%$6,911

Saving per week$133

Your $20,031 annual cash shortfall is reduced to $13,120 after the tax benefit — saving $6,911/yr.

Break-Even & Yields

Break-even rent (pre-tax)$935/wk

Break-even rent (after tax)$935/wk

Current weekly rent$550/wk

Gross yield3.57%

Net yield (excl. interest)2.50%

LVR80.0%

Equity$160,000

How to Use This Calculator

1Enter your property value and loan amount (or LVR)
2Enter the interest rate on your investment loan
3Enter the expected weekly rent
4Add your annual property expenses — management fees, rates, insurance, maintenance
5Optionally add depreciation if you have a quantity surveyor report
6Select your marginal tax rate to see the after-tax benefit

What Is Negative Gearing?

Negative gearing occurs when the costs of owning an investment property (including loan interest) exceed the rental income it generates. The resulting loss is tax-deductible against your other income, reducing your overall tax bill.

For example, if your rental property costs you $15,000 more per year than it earns, and your marginal tax rate is 34.5%, you receive a $5,175 tax refund — reducing your real out-of-pocket cost to $9,825.

Australia has one of the most generous negative gearing systems in the world. It is commonly used by property investors to reduce taxable income while hoping for long-term capital growth to offset the ongoing losses.

Key Factors to Understand

Loan interest: The largest expense for most investors. On a $640,000 loan at 6.25%, annual interest is $40,000. This is fully deductible against rental income.
Marginal tax rate: The higher your tax rate, the bigger the tax benefit. A 47% taxpayer receives nearly twice the benefit of a 21% taxpayer on the same rental loss.
Depreciation: A non-cash deduction based on the wear and tear of the property and its fittings. A quantity surveyor report can identify $5,000–$15,000+ in annual deductions on newer properties.
Break-even rent: The weekly rent at which your property becomes cash-flow neutral. The after-tax break-even is always lower than the pre-tax figure due to the tax benefit.
Capital growth: Negative gearing is a long-term strategy that depends on capital growth to deliver a profit. The ongoing loss is the price you pay for exposure to property appreciation.

Tips for Property Investors

•Compare the after-tax break-even rent to current market rents in the area — this tells you how sustainable the investment is
•Get a quantity surveyor depreciation report on any property built after 1985 — it can significantly improve your after-tax position
•Interest rates move — use the scenario comparison feature to model your cash flow at rates 1–2% higher
•Positive gearing is more tax-efficient at lower income levels; negative gearing provides the most benefit at the top marginal rate
•Consider LMI cost recovery time when borrowing above 80% LVR on an investment property
•Track your rental income and expenses with our Expense Tracker for a clean EOFY report

Frequently Asked Questions