Negative Gearing Calculator Australia 2026
| Breakdown | Amount (your share) |
What Is Negative Gearing in Australia?
Negative gearing is a property investment strategy where the total costs of owning a rental property are greater than the rental income it generates. In Australia, the ATO allows investors to offset this net rental loss against other assessable income, such as salary or business income. The result is a reduction in your total taxable income and a lower income tax bill for the financial year.
Under ATO rules for FY2025-26, deductible rental expenses include loan interest, property management fees, council rates, insurance, maintenance and repairs, and depreciation under Division 43 (capital works at 2.5% per year) and Division 40 (plant and equipment). These deductions combine to form your total claimable expenses. When expenses exceed rental income, the shortfall is your negative gearing loss.
The tax benefit is not a dollar-for-dollar refund. It is a proportional saving equal to your net rental loss multiplied by your marginal tax rate including the 2% Medicare levy. For example, an investor on a $120,000 salary with a $15,000 annual rental loss at a 32% effective marginal rate (30% income tax plus 2% Medicare levy) saves $4,800 in tax per year, reducing the effective weekly cost of holding the property.
Who Should Use This Negative Gearing Calculator?
This negative gearing calculator Australia is designed for anyone evaluating a residential investment property purchase or reviewing an existing rental property's tax position. It covers the following situations:
- First-time investors assessing whether a property will be negatively or positively geared
- Existing landlords estimating their annual ATO tax refund at tax time
- Joint investors wanting to calculate their individual ownership share of deductions
- High-income earners (37% or 45% tax bracket) modelling tax minimisation strategies
- Accountants and mortgage brokers preparing investment property scenarios for clients
- Investors comparing interest-only versus principal-and-interest loan structures
- Anyone wanting to include Division 43 capital works depreciation in their tax benefit estimate
How to Use the Negative Gearing Calculator Australia
- Enter your annual pre-tax income. This sets your marginal tax rate bracket under ATO FY2025-26 rates. The higher your income, the larger your tax benefit per dollar of rental loss.
- Enter property value and loan amount. The loan amount drives your annual interest calculation. Enter the full outstanding loan balance, not the purchase price less deposit.
- Set your interest rate. Use your current or expected annual interest rate. The average investment loan rate in Australia in early 2026 is approximately 6.20% to 6.50% p.a.
- Enter your weekly rent. The calculator annualises this over 52 weeks to calculate your gross annual rental income.
- Enter annual expenses. Add council rates, insurance, and maintenance. The management fee is entered as a percentage of rental income (typically 7-10%). If you have a depreciation schedule, enter the building's construction cost for Division 43 deductions.
- Set your ownership share. For properties owned 50/50, enter 50%. Each owner claims their proportional share of income and deductions individually.
- Click Calculate. You will see your weekly out-of-pocket cost, annual ATO tax benefit, net rental result, and a full expense breakdown. You can export results as CSV or PDF.
2025-26 ATO Income Tax Rates Used in This Calculator
This negative gearing tax calculator applies the current ATO resident tax rates for FY2025-26 (1 July 2025 to 30 June 2026), including the 2% Medicare levy. These are the rates used to calculate your marginal rate and tax benefit:
| Taxable Income | Tax Rate (excl. Medicare) | Effective Rate (incl. 2% Medicare) |
|---|---|---|
| $0 to $18,200 | 0% | 2% |
| $18,201 to $45,000 | 16% | 18% |
| $45,001 to $135,000 | 30% | 32% |
| $135,001 to $190,000 | 37% | 39% |
| $190,001 and above | 45% | 47% |
Source: ATO Tax Rates for Australian Residents. The Low Income Tax Offset (LITO) of up to $700 is also applied for lower-income investors and will slightly reduce the calculated tax at income levels below $66,667.
Negative Gearing Tax Benefit: Worked Examples
Rent: $550/week | Expenses: $40,560/yr
Rental income: $28,600/yr | Net loss: $11,960/yr
Marginal rate: 32% (30% + 2% Medicare)
Annual Tax Benefit: $3,827 Weekly out-of-pocket: approx. $157/wk after tax benefit
Rent: $650/week | Expenses: $48,760/yr
Rental income: $33,800/yr | Net loss: $14,960/yr
Marginal rate: 39% (37% + 2% Medicare)
Annual Tax Benefit: $5,834 Weekly out-of-pocket: approx. $175/wk after tax benefit
Rent: $520/week | Expenses: $33,950/yr
Rental income: $27,040/yr | Net loss: $6,910/yr
Marginal rate: 32% (30% + 2% Medicare)
Annual Tax Benefit: $2,211 Weekly out-of-pocket: approx. $91/wk after tax benefit
Rent: $750/week | Construction cost: $350,000 (Div 43: $8,750/yr)
Net loss: $27,700/yr | Marginal rate: 47%
Annual Tax Benefit: $13,019 Weekly out-of-pocket: approx. $281/wk after tax benefit
Negative Gearing Quick Reference Table
The table below shows estimated annual tax benefits for common income levels and annual rental loss amounts using FY2025-26 ATO rates including Medicare levy:
| Annual Income | Marginal Rate (incl. Medicare) | $5,000 Loss | $10,000 Loss | $15,000 Loss | $20,000 Loss |
|---|---|---|---|---|---|
| $45,000 | 18% | $900 | $1,800 | $2,700 | $3,600 |
| $60,000 | 32% | $1,600 | $3,200 | $4,800 | $6,400 |
| $80,000 | 32% | $1,600 | $3,200 | $4,800 | $6,400 |
| $100,000 | 32% | $1,600 | $3,200 | $4,800 | $6,400 |
| $120,000 | 32% | $1,600 | $3,200 | $4,800 | $6,400 |
| $140,000 | 39% | $1,950 | $3,900 | $5,850 | $7,800 |
| $160,000 | 39% | $1,950 | $3,900 | $5,850 | $7,800 |
| $180,000 | 39% | $1,950 | $3,900 | $5,850 | $7,800 |
| $200,000 | 47% | $2,350 | $4,700 | $7,050 | $9,400 |
| $250,000 | 47% | $2,350 | $4,700 | $7,050 | $9,400 |
| $300,000 | 47% | $2,350 | $4,700 | $7,050 | $9,400 |
| $400,000 | 47% | $2,350 | $4,700 | $7,050 | $9,400 |
| $500,000 | 47% | $2,350 | $4,700 | $7,050 | $9,400 |
| $30,000 | 18% | $900 | $1,800 | $2,700 | $3,600 |
| $50,000 | 32% | $1,600 | $3,200 | $4,800 | $6,400 |
These estimates assume the full loss falls within one marginal tax bracket. For losses that cross bracket boundaries, the actual tax benefit will be a blended figure. Use the calculator above for exact results.
What Expenses Are Deductible Under Negative Gearing?
The ATO allows the following expenses to be deducted from rental income when calculating your net rental result for negative gearing purposes in FY2025-26:
| Expense Type | Deductible? | Notes |
|---|---|---|
| Loan interest | Yes | Interest-only or interest portion of P&I repayments |
| Property management fees | Yes | Typically 7-10% of gross rental income |
| Council rates | Yes | Full amount is deductible |
| Landlord insurance | Yes | Building and contents for rental properties |
| Maintenance and repairs | Yes | Like-for-like repairs; not capital improvements |
| Cleaning and gardening | Yes | If incurred to maintain rental income |
| Advertising for tenants | Yes | Including online listing fees |
| Strata levies (admin fund) | Yes | Sinking fund contributions may differ; check with accountant |
| Div 43 capital works (2.5%) | Yes | Buildings constructed after 18 July 1985 only |
| Div 40 plant and equipment | Yes (depreciation) | Appliances, carpets, hot water systems |
| Travel to inspect property | No | No longer deductible from 1 July 2017 |
| Capital improvements | No (immediate) | Added to cost base; deductible over time via depreciation |
| Loan principal repayments | No | Only the interest component is deductible |
Negative Gearing vs Positive Gearing: Key Differences
Understanding the difference between negative gearing and positive gearing is essential for any Australian property investor. Here is a direct comparison:
| Factor | Negative Gearing | Positive Gearing |
|---|---|---|
| Rental income vs expenses | Expenses exceed income | Income exceeds expenses |
| Tax treatment | Loss offsets other income; reduces tax | Rental profit added to taxable income; increases tax |
| Cash flow | Negative (you top up the shortfall) | Positive (property pays for itself) |
| Best suited to | High-income earners in growth markets | Investors prioritising cash flow and lower risk |
| Long-term strategy | Capital growth expected to outpace losses | Income yield sufficient to justify the investment |
| Annual ATO tax benefit | Yes (loss x marginal rate) | No (additional tax payable on profit) |
| Out-of-pocket holding cost | Yes (offset by tax benefit) | No (property is self-funding) |
How Division 43 Depreciation Increases Your Tax Benefit
Division 43 is one of the most overlooked negative gearing deductions. It allows Australian property investors to claim 2.5% of the original construction cost of a residential building per year as a tax deduction, provided construction commenced after 18 July 1985. This is a non-cash deduction, meaning you do not spend any money to claim it.
For a property with a construction cost of $350,000, the annual Division 43 deduction is $8,750. At a 32% effective marginal rate, this adds $2,800 to your annual tax benefit without any additional cash outlay. Over 10 years, that is $28,000 in additional tax savings from depreciation alone.
Division 40 covers plant and equipment, such as carpets, appliances, hot water systems, air conditioning units, and blinds. For investment properties purchased after 9 May 2017, Division 40 depreciation is limited to assets that are new or those installed by the investor. An ATO-compliant depreciation schedule from a quantity surveyor is recommended to maximise all available deductions.
Edge Cases and Exemptions to Be Aware Of
Several situations affect how negative gearing rules apply to your investment property:
| Situation | Impact on Negative Gearing |
|---|---|
| Property is vacant (not tenanted) | Expenses may still be deductible if property is genuinely available for rent and advertised |
| Holiday home or part-time rental | Deductions must be apportioned for periods the property was available for rent |
| Property used personally by the owner | Personal-use periods are excluded from deductions |
| Loss exceeds total income | Excess loss may be carried forward to future years; cannot create a negative taxable income below zero |
| Non-resident investors | Different withholding tax rules and loss treatment apply; ATO requires separate assessment |
| Trust or company ownership | Losses within a trust or company generally cannot be distributed as negative gearing to individual beneficiaries |
| Shares bought on margin loan | Same negative gearing principle applies; margin loan interest exceeding dividend income is deductible against other income |
| Short-stay rental (Airbnb) | Deductions must reflect the actual proportion of time genuinely available to short-stay guests |
When to Lodge and What to Do at Tax Time
Australian property investors must declare all rental income and claim all eligible deductions in their annual income tax return, typically lodged between 1 July and 31 October following the end of the financial year (or later if using a registered tax agent).
The ATO requires you to keep records for all rental income and expenses for at least five years from the date you lodge your return. This includes bank statements, receipts for repairs and maintenance, property management statements, insurance documents, council rate notices and any depreciation schedule.
If you have multiple investment properties or significant deductions, the ATO may conduct a review or audit. Accurate record-keeping and using a registered tax agent or accountant with property investment experience significantly reduces this risk.
Frequently Asked Questions About Negative Gearing Australia 2026
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Calculation methodology sourced from official government publications. See our Editorial Policy for how we build and maintain our calculators.