Negative Gearing Calculator AU 2025-26

What this calculator works out

This tool estimates the real, after-tax cost of holding an Australian residential investment property when the rent does not cover the running costs — the situation Australians know as negative gearing. It returns three numbers most off-the-plan brochures skip over:

1. The weekly cash shortfall before tax — the amount you have to top up out of salary every week to keep the loan, council rates, strata levies, insurance and repairs paid.
2. The tax refund that the negatively geared loss generates at your marginal tax rate, and the resulting after-tax weekly holding cost.
3. The CGT-adjusted exit position if you sell after 5, 10, 15 or 20 years — applying the 50% individual CGT discount under Division 115 of the Income Tax Assessment Act 1997 — and the total after-tax return over the hold.

The calculator does not include stamp duty, lender’s mortgage insurance (LMI), conveyancing or annual land tax. Those are one-off or state-specific bills and have their own calculators on this site.

The formula and where the rates come from

The deductible expenses follow the categories the Australian Taxation Office (ATO) lists on its Rental properties guidance: loan interest, property management fees, council rates, water rates, strata levies, insurance, repairs and maintenance, and depreciation (capital works under Division 43 plus plant and equipment under Division 40).

loanAmount             = purchasePrice − depositAmount
annualInterest         = loanAmount × loanInterestRate
grossAnnualRent        = weeklyRent × 52
vacancyDeduction       = grossAnnualRent × 4%        (≈ 2 weeks/year)
effectiveAnnualRent    = grossAnnualRent − vacancyDeduction
propertyMgmtFee        = effectiveAnnualRent × propertyMgmtPct
cashDeductions         = annualInterest + propertyMgmtFee
                       + annualCouncilWaterStrata + annualInsurance + annualRepairs
totalDeductions        = cashDeductions + annualDepreciation
pretaxCashflow         = effectiveAnnualRent − cashDeductions
taxableLoss            = effectiveAnnualRent − totalDeductions
taxRefund              = max(0, −taxableLoss) × marginalTaxRate
afterTaxAnnualCashflow = pretaxCashflow + taxRefund

For the CGT exit position, the calculator assumes a long-term individual investor:

futureValue        = purchasePrice × (1 + growthRate)^holdYears
capitalGain        = futureValue − purchasePrice
cgtAfterDiscount   = capitalGain × 50% × marginalTaxRate     (held > 12 months)
totalAfterTaxReturn = capitalGain − cgtAfterDiscount + cumulativeAfterTaxCashflow

The 50% discount is the figure the ATO publishes for Australian-resident individuals under Division 115 of ITAA 1997. Companies do not get the discount and complying super funds get a 33.33% discount instead — those entities are out of scope for this calculator. Foreign and temporary residents have had the discount removed for periods after 8 May 2012, and the calculator does not model that case either.

How to read the inputs

• Purchase price — Contract price only. Stamp duty, LMI and conveyancing are paid on top at settlement.
• Cash deposit — Used to derive the loan amount. The model assumes interest-only on the loan because that is the structure most negative-gearing strategies use; principal repayments are not deductible.
• Loan interest rate — Pull this from your indicative loan offer. Note that rates have moved with the RBA cash rate, so a small change here can swing the weekly holding cost by tens of dollars.
• Asking weekly rent — The rent the property is expected to achieve. The calculator subtracts a flat 4% vacancy (about 2 weeks/year) to give an effective rent.
• Property management fee — Typically 5–10% of rent collected in capital cities. Some agencies also charge letting fees, advertising or admin fees that you can add to Repairs or Council/water/strata if you want to be conservative.
• Council, water and strata (annual) — Combine all three for simplicity. For a freestanding house, set strata to zero.
• Depreciation (Div 40 + Div 43) — Use the totals from a quantity surveyor’s tax depreciation schedule. Newer builds claim a lot more here than older properties, because plant and equipment claims for second-hand residential properties acquired after 9 May 2017 were largely removed by Treasury Laws Amendment (Housing Tax Integrity) Act 2017.
• Marginal tax rate — The headline rate that applies to the next dollar of your taxable income. The calculator deliberately leaves the 2% Medicare levy out so the refund estimate stays conservative.
• Expected annual capital growth — Pick a sober number. Long-run residential averages typically sit at 3–6% per annum depending on the city and decade; a 10% assumption is a marketing number, not a planning one.
• Holding period — 5, 10, 15 or 20 years. The CGT discount only applies when you hold for more than 12 months.

Worked examples

1. Typical Sydney unit ($700k, 80% LVR, 6.5% interest, $550/week rent, 37% MTR, 10-year hold at 5% growth). Loan = $560,000. Interest = $36,400. Effective rent = $27,456. Total deductions including $8,000 depreciation = $53,659. Taxable loss = −$26,203. Refund at 37% = $9,695. After-tax annual holding cost ≈ $8,508, or about $164/week out of pocket. After 10 years at 5% growth the property is worth roughly $1.14M. Capital gain ≈ $440k, CGT after 50% discount ≈ $81.4k, total after-tax return over the hold ≈ $274k.

2. Strongly negatively geared ($900k, 90% LVR, 7.5%, $500/week, 45% MTR, 5-year hold). Interest alone is $60,750 against $24,960 of effective rent. Taxable loss ≈ −$59,587, refund at 45% ≈ $26,814. The investor still tops up roughly $400/week after the refund. With only 4% growth over 5 years, the gain ($195k) and after-discount CGT ($43.9k) barely cover the cumulative shortfall — the strategy depends almost entirely on the growth assumption holding up.

3. Positively geared cash-rich purchase ($400k, 50% LVR, 6%, $500/week, 30% MTR). Interest is only $12,000. Effective rent ($24,960) more than covers the costs. Taxable position is +$4,313 for the year, which means tax payable, not a refund. The property pays the investor about $96/week in net income — a positively geared scenario, not a negatively geared one.

4. Cash purchase ($800k, no loan, $700/week, 37% MTR). With no interest deduction, the property is positively geared from day one (taxable profit ≈ $18k). The CGT exit dominates the return, but the absence of leverage means the same dollars deployed elsewhere may grow faster — a classic asset-allocation trade-off worth modelling separately.

Common pitfalls

• Confusing the refund with profit. A $9,000 tax refund on a $26,000 loss does not mean you made $9,000 — you lost $17,000 in cash and got a third of it back at tax time. You only profit overall if capital growth exceeds the cumulative after-tax shortfall.
• Using marketing growth assumptions. Brochures often quote 8–10% p.a. growth based on a single hot decade. Test the same property at 3% and 4%; if it stops working, the strategy is a bet on prices, not on yield.
• Forgetting depreciation gets clawed back at sale. Division 43 capital works claimed during ownership reduce the cost base for CGT, which increases the eventual gain. The calculator does not auto-adjust the cost base; if you are going to sell, build in a buffer.
• Ignoring rate moves. A 1 percentage point rise in the loan rate on an $800k loan is $8,000/year before tax — about $100/week after a 37% refund. Stress-test the weekly figure at +1% and +2%.
• Treating the strategy as risk-free. Investor losses are subject to Australian tax law and have been periodically reviewed by Treasury and the ATO. The CGT discount and negative-gearing rules could change in a future federal budget; published reform proposals have included quarantining losses to the property and removing the 50% discount. Do not assume the current settings are permanent.
• Mixing up land tax and stamp duty. Stamp duty is paid once at settlement (see NSW, VIC and QLD calculators). Land tax is an annual bill in most states once your aggregated landholdings cross a threshold (NSW land tax calculator). Neither is included in the weekly holding cost shown above.

When to talk to a professional

This calculator gives a general estimate based on ATO-published rules and indicative inputs. The typical after-tax holding cost for the scenarios above is the figure shown, but binding numbers — particularly anything involving a depreciation schedule, an SMSF or company structure, foreign-resident treatment, or a contract that is part-PPR / part-investment — should go through a registered tax agent and a conveyancer or property lawyer. Investor losses are subject to tax law changes; nothing on this page is personal tax, legal or financial advice.

Related calculators

• Property Depreciation Calculator AU — work out the Div 40 + Div 43 number that feeds into the Annual depreciation input above.
• NSW Land Tax Calculator — annual land tax once your NSW landholdings cross the threshold.
• NSW Stamp Duty Calculator — one-off transfer duty paid at settlement, including foreign purchaser surcharge.
• VIC Stamp Duty Calculator — Victorian equivalent for cross-border investors.
• HECS-HELP Repayment Calculator — model the impact of a property loss on your HECS-HELP repayment income.

Sources:

• ATO — Residential rental properties
• ATO — Rental expenses to claim
• ATO — Capital works deductions (Division 43)
• ATO — Decline in value of depreciating assets (Division 40)
• ATO — CGT discount
• MoneySmart (ASIC) — Property investment