Negative Gearing Calculator

Negative gearing means your rental property costs more to hold than it earns in rent. Your deductible expenses, including mortgage interest, council rates, insurance, repairs, property management fees, and depreciation, add up to more than the rental income you receive. The difference is a loss.

Under Australian tax law, that loss doesn't just sit there. You can offset it against your other income, typically your salary or wages, to reduce the total amount of income tax you pay. This is the core tax benefit of negative gearing, and it's one of the most widely used strategies among Australian property investors.

The term "gearing" refers to borrowing money to invest. When borrowing costs (mainly mortgage interest) push your total expenses above your income, the property is "negatively" geared. If income exceeds expenses, the property is positively geared.

Most landlords with a mortgage are negatively geared in the early years of ownership. Interest payments are at their peak, the loan balance is at its highest, and rent hasn't yet grown to cover the gap. Over time, as rents rise and you pay down the loan, a negatively geared property can gradually shift toward neutral or positive gearing.

It's important to understand that negative gearing is not a money-making strategy on its own. You are making a real cash loss on the property each year. The tax benefit softens that loss, but doesn't eliminate it. The strategy only works if the property gains enough in value over time to offset those accumulated losses when you eventually sell. For a full explanation, see our guide on negative gearing explained.

The tax benefit of negative gearing comes down to how Australia's tax system handles investment losses. When your rental property makes a loss, that loss reduces your total taxable income, which means you pay less income tax.

Here's the mechanics. Your marginal tax rate determines how much you save for every dollar of rental loss. The 2025-26 Australian individual tax rates are:

• $0 to $18,200: 0% (tax-free threshold)
• $18,201 to $45,000: 16%
• $45,001 to $135,000: 30%
• $135,001 to $190,000: 37%
• $190,001 and above: 45%

If you earn $100,000 from your salary and your rental property makes a $10,000 loss, your taxable income drops to $90,000. At the 30% marginal rate, that $10,000 loss saves you $3,000 in tax. Your actual out-of-pocket cost for the year is the $10,000 cash loss minus the $3,000 tax saving, which is $7,000.

The higher your marginal rate, the bigger the tax benefit. The same $10,000 loss at a 37% rate saves $3,700, bringing the after-tax cost down to $6,300. At 45%, the saving is $4,500. This is why negative gearing is often described as being more beneficial for higher-income earners.

One detail that catches people: depreciation is a non-cash deduction. It increases your rental loss (and therefore your tax saving) without costing you any actual money that year. A property with $8,000 in depreciation deductions can significantly deepen the tax benefit of negative gearing without increasing your cash shortfall. This is why getting your rental property tax deductions right, including depreciation, matters so much.

Let's put real numbers on it. Say you own an investment apartment in Sydney that you rent out for $650 per week, giving you annual rental income of $33,800.

Your annual deductible expenses:

• Mortgage interest: $28,000
• Council rates: $1,400
• Water rates: $900
• Landlord insurance: $1,200
• Repairs and maintenance: $1,500
• Strata levies: $4,800
• Depreciation (Division 40 + Division 43): $7,200

Total deductible expenses: $45,000

Rental loss: $45,000 - $33,800 = $11,200

Your property is negatively geared by $11,200. Now let's see the tax impact.

You earn $120,000 from your day job. Without the rental loss, you'd be taxed on $120,000. With it, your taxable income drops to $108,800. At the 30% marginal rate that applies to income between $45,001 and $135,000, the $11,200 loss saves you roughly $3,360 in tax.

But here's the important part: of that $11,200 loss, $7,200 is depreciation, a non-cash deduction. Your actual cash shortfall is only $4,000 ($45,000 in expenses minus $7,200 in depreciation minus $33,800 in rent). After the $3,360 tax refund, your real out-of-pocket cost for the year is just $640.

That's the power of combining negative gearing with depreciation. The depreciation doesn't cost you anything in cash, but it boosts your deductible loss and therefore your tax saving. Without claiming depreciation in this example, your tax saving would be only $1,200 instead of $3,360.

For the latest on potential rule changes, see our article on negative gearing changes in 2026.

Negative gearing is not a guaranteed path to wealth. It's a bet that your property will grow in value enough to justify the annual losses you're absorbing along the way. Whether that bet pays off depends on a few things.

When it works well:

• Strong capital growth. You buy in a suburb with genuine long-term demand, limited supply, and proximity to jobs, transport, and schools. Over a 10 to 15 year hold, the property appreciates enough to more than cover your accumulated losses and the capital gains tax on sale.
• High marginal tax rate. The tax benefit is proportional to your income. If you're on the 37% or 45% rate, the government is effectively subsidising 37 to 45 cents of every dollar of loss. At lower rates, the subsidy is smaller.
• Strong depreciation. A newer property with assets you've installed yourself can generate thousands in non-cash deductions that deepen your tax benefit without increasing your cash shortfall. This can make a modestly negative property almost cost-neutral after tax.
• Comfortable cash buffer. You can cover the monthly shortfall without financial stress, even if interest rates rise or you have a vacancy period.

When it doesn't work:

• Flat or falling property values. If the property doesn't grow, you're simply losing money each year with no payoff at the end. A $5,000 annual after-tax loss over 10 years is $50,000 gone, before you even account for the opportunity cost.
• Forced early sale. If you need to sell in a downturn or before the property has had time to appreciate, you can crystallise a loss with no capital gain to offset it.
• Cash flow pressure. If the monthly shortfall stretches your budget, a rent increase that doesn't materialise or an unexpected repair bill can create real financial strain.
• Interest rate rises. A sharp rise in your mortgage rate can push a modestly negative property into deep losses that the tax benefit can't keep pace with.

The key question isn't whether your property is negatively geared. It's whether the total return, combining rental income, tax benefits, and capital growth, justifies the risk and the cash you're committing along the way.

Negative and positive gearing are not competing strategies in the way people sometimes present them. They're simply descriptions of your property's current cash position, and which one you're in can change over time.

Negatively geared: Expenses exceed income. You're making a cash loss, but that loss reduces your tax. This is common in the early years of ownership when mortgage interest is highest. The strategy relies on capital growth to generate a profit when you eventually sell. The after-tax cost is partially offset by the tax saving, and depreciation deductions can reduce the gap further.

Positively geared: Income exceeds expenses. You're putting cash in your pocket each month, but the surplus is taxable income. This is more common with properties bought at lower prices, in high-yield regional areas, or where the mortgage has been substantially paid down. The property is self-sustaining and doesn't require you to cover a shortfall.

Which is better? It depends entirely on your situation.

• If you're on a high income, have a strong cash buffer, and are targeting a high-growth suburb, negative gearing can make sense. The tax benefit reduces the holding cost, and you're banking on a significant capital gain later.
• If you want cash flow now, prefer lower risk, or are closer to retirement, positive gearing gives you income without relying on future property prices. It also means you're not exposed to the risk of rule changes around negative gearing.
• Many investors find their properties shift from negatively geared to positively geared over time as rents increase and the loan is paid down. This is a natural progression, not a sign that something has gone wrong.

There's no universally right answer. What matters is knowing exactly where your property stands right now. If your expenses are scattered across bank statements, invoices, and email receipts, it's hard to answer even the basic question: am I making money or losing money on this property? That's what propkt helps you see clearly, with every expense, deduction, and rental payment tracked in one place so you can make informed decisions at tax time and throughout the year.