Negative gearing calculator

What negative gearing is

What does the investment property really cost you each week? This calculates negative gearing for FY 2026–27: the rental loss, the tax that comes back at your marginal rate, and the honest after-tax cash flow — and, for a purchase after Budget night, the week once the 2027 rules start.

The ATO puts it in one sentence: when you buy a rental property with borrowed money “and the rental income is less than the deductible expenses (including interest on the borrowings)”, the shortfall “may reduce your other assessable income. This is referred to as negative gearing.” The rental loss comes off your salary, wages or business income at tax time, and any part your other income cannot absorb carries forward to the next year.

On this calculator’s opening figures the property runs at a loss of $16,000 a year and $5,120 comes back in tax. The refund softens the loss; it does not remove it. Nor do you have to wait for the refund: the ATO lets you apply for a PAYG withholding variation, so less tax comes out of each pay and the saving arrives through the year.

Positive gearing, and neutral

Positive gearing is the reverse: the rent is more than the deductible costs, so the property makes a profit that is added to your income and taxed at your marginal rate. You are cash-flow ahead but paying more tax, and once you earn $4,000 or more of investment income and your assessment leaves more than $1,000 owing, the ATO will usually ask for that tax in PAYG instalments. A property that roughly breaks even is called neutrally geared. The same property can move between all three as rents rise, rates change and the loan is paid down.

From the 2027–28 year the ATO’s sentence stops describing everyone. For an established home bought after 7.30 pm on 12 May 2026 the loss no longer reduces your other income; it is held against residential rental income and residential capital gains, then carried forward. The section on the 2027 rules below has the detail.

How to calculate negative gearing — the three lines that matter

1. Rental result = annual rent − (interest + expenses + depreciation). Negative = negatively geared.
2. Tax effect = the loss × your marginal rate (this calculator uses the exact FY 2026–27 brackets and Medicare levy, not a flat guess).
3. True cash cost = cash in minus cash out, after the refund — with depreciation added back, because it reduces tax without leaving your pocket.

The same property at different interest bills

$600/week rent, $8,000 expenses, $6,000 depreciation, $100,000 income — watch the after-tax weekly cost move with the loan:

The deductions checklist — what belongs in each field

Interest field: only the interest portion of your repayments (on an interest-only loan, that's the whole repayment; on principal-and-interest, check your loan statement — the principal is never deductible). Expenses field: council rates, water, landlord and building insurance, property management fees, repairs and maintenance, body corporate levies, land tax, pest control, advertising for tenants, and accounting fees. Depreciation field: the annual figure from a quantity surveyor's schedule (whose cost is itself deductible) — capital works at 2.5% a year plus fittings, noting that for established homes bought after mid-2017 you generally can't depreciate second-hand fittings, only the building. Not deductible anywhere: stamp duty and buying costs (they join the CGT cost base), with one exception for the duty: in the ACT, where a home is a Crown lease, the ATO treats it as a lease cost you deduct in the year you buy, explained on the stamp duty page. Also not deductible: renovation costs (depreciated, not expensed), and travel to inspect the property.

The 2027 rules — negative gearing just changed

The Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (assented 26 June 2026) rewrites this page's subject for some buyers. From 1 July 2027, losses on established residential property you last acquired after 7.30 pm on 12 May 2026 stop offsetting salary. Section 26-155 then sends the loss three places in order: against your rental income, then against capital gains on residential property for that year, and only what survives both is carried forward. Anyone who bought before Budget night is grandfathered permanently, and the test is the date you exchanged contracts, not the date you settled. FY 2026–27 works exactly as this calculator shows for every owner. Pick your purchase timing above to see both sides of the change, and read what the Act actually says for the sections, the carve-outs, and the one definition that is still missing from the law.

One limit worth stating plainly: everything above is for a single property. Section 26-155(6) reduces a quarantined loss first by the net income from any dwellings you hold that are not quarantined, so an investor with a grandfathered flat running at a profit is in a different position from someone holding one house. That ordering is in the Act; this calculator still models the single-property case, so if you hold several, the figures here are not yours.

The honest caveat

Negative gearing is a loss with a partial refund — not free money. The strategy only wins if capital growth outruns the accumulated after-tax losses. That growth is taxed when you sell: with the 50% CGT discount on a sale before 1 July 2027, and with indexation after it. Rising rents or falling rates can flip a property positive over time; this calculator shows exactly where you stand each year. Holding costs like land tax belong in your expenses line.