A property is negatively geared when its rent does not cover its interest and expenses. The loss reduces your taxable income, which reduces your tax.
This works out three things: the cash shortfall before tax, the tax you save because of it, and the net after-tax cost. The third is what the property actually costs to hold.
Works out what an investment property costs after tax, by comparing tax on your income with and without the property’s rental loss.
Which set applies depends on the jurisdiction and the date you enter. Sources last checked 2026-08-30.
Commonwealth — Income tax
1 July 2024 to 30 June 2026
Income Tax Rates Act 1986 (Cth), Schedule 7 Part I — Resident taxpayers
Commonwealth — Income tax
1 July 2026 to 30 June 2027
Income Tax Rates Act 1986 (Cth), Schedule 7 Part I — Resident taxpayers
Commonwealth — Income tax
1 July 2027 onwards
Income Tax Rates Act 1986 (Cth), Schedule 7 Part I — Resident taxpayers
Commonwealth — Medicare levy
1 July 2026 onwards
Taxable income
Your income before the property loss is applied. This determines your marginal rate, which determines how much the loss is worth — the same loss is worth considerably more to a higher earner.
Annual interest
Interest on the investment loan, not the total repayment. Only the interest portion is deductible; principal repayments are not.
Annual expenses
Rates, insurance, strata, management fees, repairs. Deductible in the year incurred. Capital improvements are treated differently and are not this.
The cash shortfall is what leaves your pocket each year before tax: rent in, interest and expenses out. This is the amount you need to be able to fund from other income.
The tax benefit is the difference between your tax with and without the loss. It is your marginal rate applied to the loss, which is why the same property costs a high earner less to hold than it costs a low earner.
The net cost is the shortfall less the benefit — the real annual cost of holding the property. Note that it is still a cost. Negative gearing reduces a loss; it does not turn one into a gain. The strategy only works if capital growth exceeds the accumulated after-tax cost.
Every figure below is computed by the same calculator on this page, from the inputs described. Nothing here is typed in by hand, so an example cannot disagree with the tool.
The tax benefit covers a substantial share of the shortfall, and the net cost is what remains. That remainder has to be funded every year, from salary.
Identical property, identical shortfall, larger tax benefit and lower net cost. This is the mechanism behind the observation that negative gearing is worth more to higher earners.
Rental income is the weekly rent over a full year. The loss is that income less interest and expenses.
Tax is calculated twice using the income tax and Medicare levy rule sets: once on your taxable income, and once on your taxable income reduced by the loss. The difference between the two is the tax benefit.
Calculating tax twice rather than multiplying the loss by an assumed marginal rate is what makes this correct when the loss moves you across a bracket boundary — which it frequently does.
How every calculator on this site is built · Regulatory sources
The property is let for the full year
No vacancy. Real vacancy increases the shortfall and the deduction alike; the rental yield calculator models it.
Depreciation is excluded
Capital works and plant depreciation are deductible non-cash amounts that can add thousands to the loss without adding to the shortfall. On a newer property that omission is significant, and it makes this estimate conservative.
The loss is fully deductible against your income
Rental losses on a property held in your own name generally are. Property held in a trust or company is treated differently, and losses may be quarantined.
One owner
A property owned jointly splits income and deductions between owners according to their ownership share, and each is taxed at their own rate.
This is not personal tax advice
It is an arithmetic model of a common structure. Your circumstances, ownership structure, other income and other deductions all change the answer, and a registered tax agent is the person to confirm it with.
Capital gains tax on sale is not modelled
The deductions claimed while holding the property reduce your tax now; the gain on sale is taxed later, with a discount for assets held over twelve months. The full picture spans both.
It assumes the loss continues
Rents rise and loans amortise. A property negatively geared at purchase frequently is not five years later, which is the intended trajectory rather than a flaw.
Works out gross and net rental yield on an investment property, allowing for vacancy and operating costs.
Works out income tax and the Medicare levy on a resident individual’s taxable income, using the statutory rate scale for the income year you choose.
Shows the repayment during an interest-only period, the higher repayment once it ends, and the extra interest it costs over the loan.
Adds transfer duty to your deposit and the other upfront costs, to show the cash you need to complete a purchase.
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