Negative Gearing Calculator
Find out exactly what your investment property costs per week after the ATO tax benefit — including Medicare levy — and see your full expense breakdown instantly.
Free. No sign-up. Updated for 2026 Australian tax rates.
Property Details
Deposit
$150,000
Loan Amount
$600,000
Interest-only loans maximise deductions
Rental Income
= $28,600/year
Annual Expenses
≈ $2,288/year
Typical: 1–2% of property value/year
Tax Information
Determines your marginal rate — tax benefit is higher for higher earners
Div 43 (building 2.5%/yr) + Div 40 (plant & equipment). Non-cash deduction — increases your tax benefit without reducing cash.
Note: Results are estimates only. Consult a qualified accountant for personalised tax advice.
How the Calculator Works
Enter Your Property
Property price, LVR, interest rate, and rental income in weekly, fortnightly, or monthly terms.
Instant Calculations
We calculate your annual loss, apply your marginal tax rate plus Medicare levy, and show the net weekly cost.
Compare All Brackets
See how the tax benefit changes across every ATO income bracket — useful for joint investors or planning income changes.
What Makes This Calculator Different
- ✓ Medicare Levy Included: Effective rates reflect 2% Medicare levy — top rate is 47%, not 45%
- ✓ Weekly Out-of-Pocket: The headline result is what you actually pay per week — not just an annual figure
- ✓ Flexible Rent Frequency: Enter rent as weekly, fortnightly, or monthly — no manual conversion needed
- ✓ Depreciation Support: Non-cash Div 43 + Div 40 deductions increase your tax benefit without costing cash
- ✓ All Brackets Compared: See how the benefit changes at every income level — helpful for couples and salary changes
Learn More About Negative Gearing
What is Negative Gearing? Complete Guide for Australian Investors
Understand how negative gearing works, who benefits most, and how to use it effectively in your property investment strategy.
Negative Gearing Cap & CGT Discount Changes — What Investors Need to Know
Stay up to date with proposed negative gearing reform debates and how potential CGT changes could affect your investment returns.
How Negative Gearing Works — A Worked Example
Negative gearing is one of the most discussed tax strategies in Australian property investment, yet many investors struggle to understand exactly how the numbers work. Below is a realistic worked example using 2026 figures that shows how negative gearing reduces your weekly out-of-pocket cost through the ATO tax benefit.
Scenario: $650,000 Investment Property at 80% LVR
Annual Rental Income
Annual Expenses
Net Result
Tax Benefit & After-Tax Cost
In this example, the investor has an annual rental loss of $14,960. Because this loss is deducted from their taxable income, the ATO effectively subsidises $5,535 of the shortfall at tax time. The real after-tax cost of holding the property is $181 per week — not the full $288 per week ($14,960 / 52) that it appears before the tax benefit.
This is the core mechanism of negative gearing: the government shares the cost of your investment property through reduced tax. The higher your marginal tax rate, the greater the subsidy. An investor earning $200,000 (47% effective rate) would receive $7,031 back — reducing their weekly cost to just $153.
Use the calculator above to model your own property with your actual income, expenses, and loan details. The results update instantly as you adjust the inputs.
Negative Gearing by State — How Land Tax Affects Your Deductions
While negative gearing is a federal tax mechanism — your rental loss is deducted from your ATO taxable income regardless of which state the property is in — the size of that loss varies significantly by state. The biggest variable is land tax. Each state sets its own land tax thresholds and rates, which directly affects your annual holding costs and therefore your negative gearing deduction.
| State | Land Tax Threshold | Impact on Negative Gearing |
|---|---|---|
| NSW | $1,075,000 | Minimal for single investment property — most land values fall below the threshold |
| VIC | $50,000 (land value) | Higher annual costs — significantly increases the negative gearing deduction for Melbourne investors |
| QLD | $600,000 | Moderate impact — affects higher-value Brisbane and Gold Coast properties |
| WA | $300,000 | Moderate impact — Perth properties with higher land values will incur land tax |
| SA | $450,000 | Moderate impact — Adelaide investors may fall below or near the threshold |
| TAS | $50,000 | Higher annual costs — low threshold means most investment properties attract land tax |
Victoria note: Victoria's extremely low $50,000 land tax threshold means almost every Melbourne investment property attracts land tax. While this increases your holding costs, it also increases your negative gearing deduction — and therefore your ATO tax benefit. A Melbourne investor paying $2,500 in land tax gets an additional $925 back at a 37% marginal rate. Factor land tax into your calculations using our Land Tax Comparison Calculator.
Remember that land tax is fully deductible against your rental income, so higher land tax in states like Victoria and Tasmania increases your total deductions and amplifies the negative gearing benefit. However, it also increases your real cash outflow — the tax benefit only offsets a portion of the cost. Always calculate the full after-tax position using the calculator above before committing to a purchase.
Negative Gearing vs Positive Gearing
Understanding the difference between negative and positive gearing is essential for property investors. The two strategies have fundamentally different cash flow and tax implications, and most investment properties transition from one to the other over time.
Negative Gearing
- • Expenses exceed rental income — you have a shortfall
- • The rental loss is deducted from your other taxable income
- • Higher tax benefit — ATO subsidises part of the holding cost
- • Requires cash reserves or salary to cover the weekly gap
- • Strategy relies on capital growth to deliver overall returns
Positive Gearing
- • Rental income exceeds all expenses — you have a surplus
- • The net rental income is added to your taxable income
- • No tax benefit — you pay tax on the surplus instead
- • Self-funding property with cash flow in your pocket each week
- • Lower risk profile — less dependent on capital growth
When Does Negative Gearing Become Positive?
Most investment properties in Australia start out negatively geared because mortgage interest is the largest expense, and early in the loan term, interest payments are at their highest. Over time, two forces push the property toward positive gearing:
- 1. Rent increases: Rents typically grow 3-4% per year. Over 7-10 years, this compounds significantly — $520/week today becomes approximately $640-$700/week in a decade.
- 2. Loan reduction: If you are making principal and interest repayments, your loan balance decreases over time, reducing the interest component of your repayments.
For a typical Australian investment property purchased in 2026, the transition from negative to positive gearing occurs within 7 to 10 years — sometimes sooner in high-rental-yield markets like Brisbane, Perth, or Adelaide, and later in lower-yield markets like Sydney. Interest-only loans delay the transition because the loan balance never reduces, but rent growth alone is usually enough to close the gap within a decade.
Neither strategy is inherently better — the right approach depends on your income, cash reserves, investment timeline, and risk tolerance. High-income earners ($120,000+) benefit more from negative gearing because the tax deduction is worth more at higher marginal rates. Investors closer to retirement may prefer positively geared properties for the passive income. Use the calculator above to model your specific scenario and see exactly where your property sits on the spectrum.
Negative Gearing FAQs
What is negative gearing in Australia?▼
Negative gearing occurs when your rental property's total deductible expenses (mortgage interest, council rates, insurance, management fees, depreciation) exceed the rental income. The resulting loss is deductible against your other income — reducing your overall tax bill.
How does the ATO tax benefit from negative gearing work?▼
Your annual rental loss is claimed as a tax deduction. The ATO reduces your taxable income by this amount, so you pay less tax. The saving equals your loss × your marginal tax rate (including 2% Medicare levy). A $15,000 annual loss at a 39% effective rate saves you $5,850 per year.
Why does this calculator show 47% as the top tax rate?▼
The ATO top marginal income tax rate is 45% for incomes above $180,000. The 2% Medicare levy applies on top, bringing the effective top rate to 47%. This matches what you actually pay — and what competitors like DuoTax use — ensuring accurate results.
What is depreciation and how does it boost my tax benefit?▼
Depreciation is a non-cash deduction — you don't spend the money, but you claim it as a deduction. Division 43 allows 2.5% of the building's original construction cost per year. Division 40 covers plant and equipment (appliances, carpets). A depreciation schedule typically adds $3,000–$10,000 to annual deductions without any actual cash outlay.
Is negative gearing worth it?▼
The ATO tax benefit reduces your out-of-pocket cost, but you still have a real cash shortfall each week. The strategy works when capital growth exceeds accumulated losses over time. Higher-income earners benefit more due to their higher marginal rate. Always model the full picture — not just the tax saving.
How do I calculate negative gearing?▼
Add up all deductible property expenses for the year — loan interest, council rates, water rates, insurance, property management fees, maintenance, and depreciation. Subtract your total annual rental income. If expenses exceed income, the difference is your negative gearing loss. Multiply this loss by your marginal tax rate (including 2% Medicare levy) to find your ATO tax benefit. Use the calculator at the top of this page to run the numbers instantly for your property.
What is the difference between negative and positive gearing?▼
Negative gearing means your property expenses exceed your rental income — creating a tax-deductible loss. Positive gearing means rental income exceeds expenses — creating taxable profit. Most properties start negatively geared and transition to positive gearing within 7-10 years as rents increase. See the full comparison in the Negative Gearing vs Positive Gearing section above.
Can I claim negative gearing on multiple properties?▼
Yes, under current 2026 rules you can claim negative gearing losses on any number of investment properties. Each property's rental loss is combined and deducted from your total taxable income. However, note that the Australian Treasury is currently modelling a proposed cap of two negatively geared properties per investor as part of broader housing affordability reforms. No legislation has been introduced yet, but investors with large portfolios should monitor this development.
Does negative gearing work for apartments and units?▼
Yes, negative gearing applies to any residential investment property — houses, apartments, units, townhouses, and villas. Apartments and units often have strata (body corporate) fees which are fully tax-deductible, adding to your total expenses and potentially increasing the negative gearing deduction. Newer apartments also tend to have higher depreciation deductions under Division 43 and Division 40, which boosts the tax benefit without costing you cash.
Related Calculators
Want the full negative gearing analysis PDF?
Enter your email to get the full PDF delivered to your inbox, plus weekly independent market analysis, SMSF research and investment calculators. Free, no spam, unsubscribe anytime.