Enter your rent, loan interest, costs and depreciation to see whether a property is negatively geared, the tax benefit you might get and your cash flow after tax.
Negative gearing means the costs of owning a rental property (loan interest, rates, insurance, management, repairs and depreciation) are higher than the rent, creating a rental loss. In Australia that loss can generally be deducted from your other taxable income, which reduces your tax. You still lose money overall: the tax refund only returns part of the loss, at your marginal rate.
Depreciation is a deduction that does not cost you cash in the year, so it improves your tax result but not your cash flow.
Rent $28,600, interest $30,000, other costs $9,000 and depreciation $4,000 give a net rental loss of $14,400. At a 37% marginal rate plus 2% Medicare levy, the tax benefit is about $5,616. Cash flow before tax is $28,600 − $30,000 − $9,000 = −$10,400, and after the tax benefit it is about −$4,784 a year, or about −$92 a week. The numbers are made up. Enter your own above.
Learn more on the ATO's residential rental property guidance, and test the cash flow with our rental yield and investment property calculator. Speak to a registered tax agent or licensed adviser before investing.
See gross and net yield and cash flow on an investment property.
Open the Rental Property CalculatorWhat is negative gearing?
It is when the costs of a rental property, including loan interest and depreciation, exceed the rent, creating a rental loss that can generally be deducted from your other taxable income.
How does negative gearing save tax?
The rental loss is deducted from your other income, so you pay less tax. The saving is your marginal tax rate (plus Medicare levy) applied to the loss.
Is negative gearing worth it?
Only if the property grows in value or rent enough to outweigh the cash you lose each year. You always lose more than you save in tax.
What is the difference between negative and positive gearing?
Positive gearing means the rent exceeds costs, so you make a taxable profit. Negative gearing means a loss.
Is this tax advice?
No. It is an estimate. Speak to a registered tax agent or licensed financial adviser, and check the ATO website for current rules.