Negative Gearing Calculator: How to Estimate Your Rental Loss and Tax Benefit

A negative gearing calculator shows you whether your investment property is running at a loss, how big that loss is, and roughly how much tax you could get back because of it. Here's how the calculation works, what goes into it, a worked example, and a free calculator to run your own numbers.

What Is Negative Gearing?

A property is negatively geared when the costs of owning it — mainly loan interest, plus things like rates, insurance, management fees and repairs — are higher than the rent it earns. The shortfall is a net rental loss, and in Australia that loss can generally be offset against your other taxable income, such as your salary, which may reduce the tax you pay.

The idea is that you accept a cash shortfall now in the hope of long-term capital growth. If you want the bigger picture on who this strategy tends to suit, read our guide on who benefits most from negative gearing.

How a Negative Gearing Calculator Works

A negative gearing calculator compares your annual rental income against your annual deductible property expenses. If expenses are higher, it calculates the net rental loss and then applies your marginal tax rate to estimate your tax saving and your real after-tax cost of holding the property.

What Affects Your Negative Gearing Result?

• Interest rate and loan size — interest is usually the biggest deductible cost, so a rate change moves your loss quickly
• Rental income — higher rent narrows the gap between income and expenses
• Property running costs — council rates, insurance, property management fees, maintenance and strata fees all add up
• Depreciation — a quantity surveyor's report can identify non-cash deductions on the building and fixtures, which can increase your deductible loss without extra cash leaving your pocket
• Your marginal tax rate — the higher your income, the more tax each dollar of loss can potentially save
• Interest-only vs principal & interest — only the interest portion is deductible, not the principal you repay

Worked Example

Here's a simple example using an interest-only loan, a salary of $90,000 and an assumed marginal tax rate of 30% plus the 2% Medicare levy.

In this example the property costs roughly $6,664 a year out of pocket after the tax benefit. Adding depreciation could lift the deductible loss further, but the real question is whether you can comfortably carry that shortfall and whether the property is likely to grow enough to justify it.

How Your Tax Rate Changes the Saving

Using the same $9,800 net rental loss, here's how the estimated tax saving changes at different marginal rates (including the 2% Medicare levy):

Negative Gearing vs Positive Gearing

With positive gearing, rent is higher than your expenses, so the property produces a taxable profit. Negative gearing is the opposite. Neither is automatically better — a positively geared property gives you cash flow now, while a negatively geared one is typically chosen for its potential capital growth. Many investors aim to move from negative to positive gearing over time as rents rise and the loan balance shrinks.

Risks to Consider Before You Negatively Gear

• Cash flow pressure — you fund the shortfall every week or month, and interest rate rises can widen it
• No guarantee of growth — property values can stagnate or fall, and a loss only makes sense if the asset grows
• Vacancies and repairs — periods without a tenant or unexpected maintenance increase your out-of-pocket cost
• Changing rules — tax settings can change, so check the current rules with a tax professional

Why Estimate Before You Buy?

• Shows your real weekly holding cost after tax, not just the headline loan repayment
• Helps you test different rents, rates and loan sizes before committing
• Gives you a benchmark to discuss with your broker and accountant

Frequently Asked Questions