Calculator
Negative Gearing Calculator
Negative Gearing Calculator
Running Costs & Deductions
Rates, water, insurance, repairs, strata.
Division 40 + 43 schedule total.
After-Tax Cash Flow (Weekly)
−$113.90
Gearing Analysis
This is heavily negatively geared: $14,687 a year out of pocket before tax, and even after the $8,764.19 refund at 37% (the loss including depreciation is $23,687), you still fund $5,922.81 a year — $113.90 every week. Remember the tax office refunds only a fraction of each lost dollar: you lose 100 to get 37 back. Size the weekly drain against your buffer, or re-price the loan and rent assumptions.
*Cash-flow model only. Assumes interest is deductible on an investment-purpose loan, deductions apply at your marginal rate against other income, and no capital works write-off limits apply. Excludes land tax, purchase costs, capital growth and exit CGT. Educational only — confirm with a registered tax agent.
Australia's Most Debated Investment Strategy, Priced Honestly
Negative gearing means owning a rental property whose costs — interest, rates, management fees, repairs — exceed its rent, and deducting that loss against your other income like salary. It is legal, mainstream and uniquely central to Australian property investing: roughly one in ten taxpayers owns a rental, and the majority of those run at a loss. The strategy's promise is that the tax refund softens the weekly bleed while capital growth delivers the real return; its critics note you lose a full dollar of cash to claw back only 30-47 cents of tax. The mechanics matter more than the slogans. The deductible loss has two parts: the actual cash shortfall (rent minus all expenses and interest) and non-cash depreciation under Division 40 (plant and equipment) and Division 43 (capital works), which widens the tax loss without widening the cash drain — a genuine benefit on newer buildings, worth little on older homes post-2017 changes. The refund arrives at your marginal rate and only helps if you have taxable income to shelter; losses can also be carried forward against future rental profits, and successive governments have periodically floated limits on how much rental loss high earners could claim against wages — so check the current ATO settings before relying on any in-year refund. This calculator prices the whole chain honestly: vacancy-adjusted rent, management fees and operating expenses, loan interest, the pre-tax cash flow, the widened taxable loss including depreciation, the refund at your marginal rate, and the number that actually matters weekly — your after-tax out-of-pocket cost per week, or surplus if the property pays its own way.
From Rent to After-Tax Cash Flow
The income side starts with annual rent adjusted for vacancy: weekly rent multiplied by occupied weeks (52 less your vacancy allowance). Costs stack in three layers. Management is charged as a percentage of collected rent — typically 5.5% to 9% plus letting fees in Australia. Other operating expenses cover council rates, water charges, insurance, repairs and strata levies. Interest is charged on the loan balance at your rate. Subtracting expenses and interest from rent gives the pre-tax cash flow: positive means positively geared, negative means the property is consuming cash. The tax layer then applies the depreciation deduction. Taxable income from the property equals the pre-tax cash flow minus the Division 40/43 allowance — a non-cash deduction, so it deepens the loss without changing the cash. A negative taxable position generates a benefit equal to the loss times your marginal rate, effectively refunded against your salary or other income; a positive taxable position adds extra tax instead. Adding the benefit back to the cash flow produces the after-tax result, divided by 52 for the weekly figure that determines whether this investment fits your life. Note what drives what: each dollar of deductible expense saves only your marginal rate in tax, so gearing amplifies both directions — bigger loans mean bigger refunds but bigger real losses. The calculator makes that trade explicit rather than hiding it behind the refund.
Expert Insights
You Fund Every Dollar; the ATO Refunds a Fraction
The most common misunderstanding of negative gearing is treating the refund as profit. If the property loses $10,000 a year and you're on the 37% rate, the refund is $3,700 — meaning $6,300 of real money left your household for the privilege. Negative gearing is a discount on losses, not an income. Judge every geared purchase by the after-tax weekly cost here, then ask what capital growth must average to make that annuity worthwhile after exit CGT.
Depreciation Is the Free Part of the Loss
Unlike interest and rates, depreciation costs you nothing in cash — it's a paper deduction that widens the tax loss and lifts the refund without worsening the bank account. Newer properties carry the richest schedules (Division 43 at 2.5% of construction plus Division 40 fittings), which is why new-build investors often see refunds exceeding their true cash shortfall. Older homes lost plant-and-equipment deductions for second-hand assets in 2017, so order a quantity surveyor's schedule before assuming.
Policy Risk Cuts Both Ways
Negative gearing's rules have been stable for decades, but the strategy is a perennial election debate, with proposals periodically floated to limit loss claims for high earners or restrict it to new builds. That uncertainty argues for resilience: model the property so it survives with a smaller refund or none at all, and treat any in-year benefit at your marginal rate as a bonus rather than the load-bearing wall. Strategies that need the tax break to break even are strategies that break.
Actionable Tips
- 1
Price the Weekly Gap Against Your Actual Buffer
Before committing, read the weekly after-tax figure and multiply by 52 — that is the salary the property will consume this year. Hold at least twelve months of the gap in offset or savings before settlement, because vacancies, rate rises and repairs all push the number up simultaneously. Investors who sized the gap honestly survive the bad years; those who sized it on the agent's brochure sell at the bottom.
- 2
Order the Depreciation Schedule Early
A quantity surveyor's schedule costs a few hundred dollars, is tax-deductible, and typically finds thousands in annual Division 40/43 deductions owners didn't know they had — directly increasing the refund in this calculator. On properties built or renovated after 1987 the capital-works component alone often runs $8,000-$15,000 a year for the first decade. Enter the schedule's figures here rather than guessing.
- 3
Test the Rate-Rise Scenario Before You Sign
Run the calculator twice: once at today's rate, once two points higher. Interest is the largest line in almost every geared property, and a 2% rise on a $600,000 loan strips another $12,000 of pre-tax cash flow — partially refunded, but the net hit lands weekly. If the stressed scenario exceeds your buffer, reduce the loan size or the price point until it doesn't.
Real-World Examples
Claire Sized the Gap and Slept Anyway
Claire bought a $780,000 Melbourne townhouse knowing from this analysis she'd fund $185 a week after tax at her 37% rate. She parked eight months of the gap in her offset before settlement. When her tenant left for eleven weeks and the rate rose twice, the buffer absorbed every shock without touching her lifestyle — exactly the scenario the vacancy slider had let her rehearse.
The Petropoulos' Found the Sweet Spot
Their first rental was cash-negative by $210 a week. For the second they targeted a regional city where a $430,000 unit rented at $480: the calculator showed the property covering all costs before tax, with depreciation pushing the taxable position into a small refund anyway — cash-positive and tax-sheltered. Two different strategies, but the second one funded itself while the first waited for growth.
Dev Stress-Tested the Refund Away
Dev, a surgeon on $310,000, had modelled his new rental assuming the full $28,000 loss landed against his salary each year. His accountant walked him through how policy proposals could defer or trim high-income claims, so Dev re-ran the numbers with the refund set to zero: the weekly gap was survivable, but only just. He trimmed the loan by $40,000 before settlement so the property worked whether or not the tax settings stayed friendly.
Glossary of Terms
- Negatively Geared
- A property whose deductible costs (including interest) exceed its rental income, producing a loss claimable against your other taxable income.
- Positively Geared
- A rental that generates surplus income after all expenses and interest — taxed as income, but funding itself from day one.
- Taxable Loss
- The pre-tax cash shortfall widened by non-cash depreciation deductions; the amount multiplied by your marginal rate to produce the tax refund.
- Depreciation Schedule
- A quantity surveyor's report itemising a property's Division 40 and Division 43 deductions year by year — the evidence base for the non-cash part of your rental loss.
Frequently Asked Questions
Everything you need to know about this topic.
Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the Australian tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.