Negative Gearing Calculator
Calculate the tax benefits of negative gearing on investment properties. See your actual after-tax costs and potential long-term wealth building.
What is Negative Gearing?
Negative gearing occurs when the costs of owning an investment property (mortgage interest, maintenance, rates, etc.) exceed the rental income received. The resulting loss can be deducted from your other taxable income, reducing your overall tax.
Positive Gearing
Income > Expenses = Profit (taxable)
Neutral Gearing
Income = Expenses = Break-even
Negative Gearing
Income < Expenses = Loss (tax deduction)
Annual Cash Flow Analysis
Income
Gross Rental Income $28,600
Less Vacancy -$1,144
Net Rental Income $27,456
Expenses
Interest (IO) $33,800
Other Expenses $11,002
Total Expenses $44,802
Annual Loss
-$17,346
Tax Refund
$6,418
After-Tax Cost
$10,928
Weekly Out-of-Pocket
$210
Cash Flow Breakdown
What's Tax Deductible?
✅ Immediately Deductible
- • Loan interest - your biggest deduction
- • Council rates and water rates
- • Strata fees / body corporate
- • Landlord insurance
- • Property management fees
- • Repairs and maintenance
- • Pest control, gardening
- • Advertising for tenants
- • Legal fees (tenant issues)
- • Land tax
📊 Depreciation (over time)
- • Building (Div 43) - 2.5% over 40 years
- • Plant & Equipment (Div 40) - varies by item
- • Carpet, blinds, appliances
- • Hot water systems, air conditioning
- • Security systems, smoke alarms
- ⚠️ Get a quantity surveyor report ($500-800) to maximize depreciation claims
✅ Advantages
- • Reduce taxable income and pay less tax
- • Build equity as property values grow
- • Rental income helps cover costs
- • Depreciation = non-cash deduction
- • 50% CGT discount if held 12+ months
- • Leverage - use bank's money to invest
❌ Risks
- • Property values can fall
- • Interest rate rises increase costs
- • Vacancy periods = no income
- • Problem tenants and repairs
- • CGT payable when you sell
- • Tied up capital - illiquid asset