Australia Negative Gearing Calculator 2026-27: Tax Benefit and Cash Flow

Negative gearing rules 2026-27 at a glance

In 2026-27 every Australian residential rental loss can still reduce tax on wages and other income. From 1 July 2027 that stops for established homes bought after 7:30pm AEST on 12 May 2026, under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026; properties held before then and new builds keep full negative gearing.

What is $1,000 of rental loss worth?

$1,000 of rental loss saves $320 in tax for most investors earning $66,668 to $135,000 in 2026-27: the 30% rate plus the 2% Medicare levy. It saves $390 between $135,001 and $190,000, $470 above $190,000, and nothing if your income is $18,200 or less.

The $335 band surprises most investors. Between $45,001 and $66,667 the low income tax offset (LITO) shrinks by 1.5 cents for each extra dollar, so a loss that lowers your income also wins back some offset. That is why a $15,000 loss saves $5,025 at $60,000 but $4,800 at $100,000.

How is the potential tax benefit estimated?

The negative gearing tax benefit is the difference between the tax you would pay without the rental property and the tax you pay with it. The calculator works out your net rental result, adds it to your other taxable income, and runs the full 2026-27 or 2027-28 tax calculation twice: income tax, the low income tax offset, the Working Australians tax offset from 2027-28, and the Medicare levy.

1. Net rental result. Rent received minus deductible costs: loan interest, agent fees, rates, insurance, repairs, strata, land tax, other costs and depreciation. A negative figure is a rental loss.
2. Your share. The result is multiplied by your ownership share, because the ATO splits rental income and costs by legal ownership.
3. Tax with and without. Tax is calculated on your income alone, then on your income plus your share of the rental result. The gap is the tax saved, or the extra tax on a profit.
4. Cash flow. Rent minus the costs you actually pay, including principal repayments but not depreciation, gives the cash cost. Adding the tax saved gives the after-tax cost per year and per week.

Why the calculator does not just multiply by your tax rate

Multiplying a loss by one marginal rate overstates the saving whenever the loss pulls your income into a lower bracket. On a $140,000 income, a $20,000 loss saves $6,750 in 2026-27, not $7,800 (39% of $20,000), because $5,000 of the loss falls in the 37% bracket and $15,000 falls in the 30% bracket.

Interest only and principal and interest loans

Only interest is deductible. For an interest-only loan the calculator uses balance times rate. For a principal and interest loan it runs 12 monthly repayments on the remaining term, so a $600,000 loan at 6.00% over 30 years has $35,799.57 of deductible interest and $7,368.07 of principal in year one. Principal lowers your cash flow but never your tax.

How the 1 July 2027 rules change the formula

For an established home bought after 12 May 2026, in 2027-28 the calculator applies the loss only against the other residential rental income you enter in More options. Any loss left over is shown as carried forward rather than as tax saved. Treasury's Budget examples, a $14,810 loss worth $4,761 at $80,000 and $6,961 at $210,000, are reproduced to the dollar.

How to use this negative gearing calculator

1. Choose which rules apply. Pick bought before 12 May 2026, new build or established bought after. Use the contract date, not settlement: a contract signed before 7:30pm AEST on 12 May 2026 counts as held.
2. Pick the financial year. Use 2026-27 for this year's return. Switch to 2027-28 to see the new rules and the 14% bottom tax rate.
3. Enter your taxable income. Use your income before the property: salary, interest and dividends less work deductions. Your latest notice of assessment shows last year's figure.
4. Set your ownership share. Enter 50 if you own half with a partner, as shown on the title.
5. Add the rent and weeks rented. Your agent's end of year statement shows the rent received. Use fewer than 52 weeks to allow for vacancy.
6. Enter the loan. Use the balance less any offset account, your current rate and the repayment type. Your lender's annual statement shows the interest charged.
7. Add the yearly costs. Agent fees as a percentage of rent, then rates, water, strata, insurance, repairs, land tax and other costs for the whole property.
8. Add depreciation. Use year-one figures from a quantity surveyor's tax depreciation schedule, combining capital works and plant and equipment.
9. Read and test the result. The receipt updates as you type. Open the 1 July 2027 table, try a rate rise or rent change below the calculator, then download a PDF or CSV.

How negative gearing works in Australia

Negative gearing in Australia means an investment property's deductible costs are higher than its rent, so it makes a loss that reduces the tax you pay on your salary and other income. The term is not defined in tax law: it follows from the general deduction rule in section 8-1 of the Income Tax Assessment Act 1997, which lets you deduct costs of earning assessable income.

The loss reduces your taxable income, so the tax saving equals the tax on that slice of income. You still spend more than you get back: at a 32% rate, every $1,000 of loss costs you $680 after tax. Investors accept that cost because they expect capital growth when they sell.

Negative gearing is common. Treasury reports that around 230,000 individuals, about 1% of taxpayers, bought negatively geared properties in 2022-23, and the average loss for an investor in the top tax bracket was $14,390.

Is negative gearing different in NSW, Victoria or other states?

No. Negative gearing is a federal income tax rule, so it works the same way in New South Wales, Victoria, Queensland and every other state and territory. What differs by state is the size of some costs: land tax is deductible and varies widely, while stamp duty is not deductible and adds to the property's cost base instead. Use the stamp duty calculator for your state to price the purchase.

Negative gearing changes from 1 July 2027

From 1 July 2027, negative gearing of residential property is limited to new builds and to properties held before 7:30pm AEST on 12 May 2026. The change was announced in the 2026-27 Budget and passed Parliament on 25 June 2026 as the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which the ATO confirms is now law.

What counts as a new build

A new build is a home that genuinely adds to housing supply: built on vacant land, or built where an existing home was knocked down and replaced with more dwellings. It cannot have been sold before, unless the builder owned it and it was occupied for no more than 12 months. Only the first buyer gets the concession; later buyers of the same home do not.

Losses on established homes: offset and carry forward

A loss on an affected established home is not lost. From 2027-28 it reduces net income from your other residential rentals and residential capital gains, and anything left over carries forward to later years. In Treasury's example, an investor earning $100,000 built up $22,879 of carried-forward losses in five years, then used them against later rent and the sale, paying $186 more tax overall than under the old rules.

The cost is timing. With the calculator's example property, an established purchase saves $5,718.40 in 2026-27 but nothing in 2027-28, so the after-tax cost rises from $156.76 to $266.73 a week while $17,870 of loss carries forward.

Capital gains tax changes alongside

From 1 July 2027 the 50% capital gains tax discount is replaced by cost base indexation and a minimum 30% tax rate for gains that build up from that date. Gains made before 1 July 2027 keep the 50% discount. Buyers of new builds can choose either method when they sell. Shares and other assets held over 12 months are also affected.

Who the change applies to

The limit applies to individuals, partnerships, companies and most trusts. Widely held trusts, such as most managed investment trusts, and superannuation funds, including self-managed super funds, are excluded. Commercial property is not affected.

Worked example: rental income versus expenses

These examples use 2026-27 resident tax rates unless stated, and every figure comes from the same model as the calculator. Load any of them by entering the numbers shown.

Negative gearing tax benefit by income

A rental loss saves more tax the higher your income, but the relationship is not a straight line. This table shows the 2026-27 tax saved by a resident with no other deductions, including the Medicare levy and low income tax offset, for losses from $5,000 to $30,000.

Two patterns stand out. Below the $18,200 tax-free threshold a loss is worth nothing, so at $30,000 any loss beyond $11,800 adds no saving. And a loss that crosses a bracket mixes rates: $30,000 of loss at $150,000 saves $10,650, not 39% of $30,000. Use the Australian income tax calculator to see your full tax and take-home pay.

Which rental property expenses may be deductible?

Rental property expenses are deductible when you incur them to earn rent and the property is rented or genuinely available for rent. The ATO sorts them into costs you claim straight away, costs you claim over several years, and costs you can never claim. Expenses the tenant pays are never yours to claim.

Claim now

Day-to-day costs of renting are deducted in the year you pay them. Interest is usually the largest: in the calculator's example it is $36,000 of $48,870 in deductions. Repairs restore something to its original condition, such as replacing broken tiles; an improvement goes further and is claimed over time instead.

Claim over several years

Capital works deductions (Division 43) cover the building itself, usually 2.5% of construction cost a year for 40 years. Plant and equipment (Division 40) covers items such as hot water systems and blinds, written off over their effective life. Borrowing costs such as loan establishment fees are spread over 5 years, or the loan term if shorter, when they total more than $100.

Never deductible

Principal, purchase costs and stamp duty are capital, not running costs. Since 1 July 2017, travel to inspect or maintain a residential rental is not deductible for most individual investors. For a home bought after 7:30pm on 9 May 2017, plant and equipment already used by the previous owner cannot be depreciated, which is why new builds usually carry larger depreciation deductions.

Negative gearing vs positive gearing

A negatively geared property makes a loss and reduces your tax; a positively geared property makes a profit and adds to your tax; a neutrally geared property roughly breaks even. Which you have depends on rent, interest rates, costs and depreciation, and it can change from year to year as rents rise or the loan is paid down.

Depreciation explains why a property can be cash-flow positive and still negatively geared. Depreciation is a deduction with no cash payment, so rent can cover every bill while the tax result is a loss. The calculator shows both figures, plus the weekly rent needed to break even for tax and for cash.

Negative gearing for couples and joint owners

Joint owners split rental income and expenses in line with their legal ownership on the title, so a couple owning 50/50 each claims half of the loss. The ATO applies this even if one owner pays all the costs or the couple agree a different split, so the ownership choice at purchase fixes who gets the tax benefit for as long as you own the property.

The higher-earner split saves the most while the property makes a loss, but the same owner also pays more tax on rental profits later and on the capital gain when you sell. To model your share, enter your own income and your percentage in the calculator; your partner can repeat it with theirs.

Get the tax benefit in each pay

You can receive a negative gearing tax saving through your pay instead of waiting for your tax return by lodging a PAYG withholding variation application with the ATO. If approved, the ATO tells your employer to withhold less tax. The example property's $5,718.40 saving would add about $219.94 to each fortnightly pay.

1. Estimate the loss. Use this calculator with this year's expected rent, interest and costs.
2. Apply to the ATO. Lodge the PAYG withholding variation application, listing every rental property you own.
3. Renew each year. A variation ends with the income year, so lodge a new one before it expires.

Exceptions and edge cases

The standard negative gearing calculation assumes an Australian resident individual who rents the property all year. These cases change the result.

The loss is bigger than your other income

Your taxable income cannot go below nil, so the unused part becomes a tax loss you carry forward. On $15,000 of other income, a $20,000 loss saves nothing in 2026-27, because $15,000 is already under the $18,200 tax-free threshold, and $5,000 carries forward. The calculator shows this as a tax loss.

Foreign residents

Foreign residents pay 30% from the first dollar up to $135,000, with no tax-free threshold, low income tax offset or Medicare levy. A $15,000 loss against $60,000 of Australian income saves $4,500. Choose Foreign resident under More options.

Trusts and self-managed super funds

A loss made inside a trust stays in the trust; it cannot be passed to beneficiaries to reduce their wages tax. Self-managed super funds are excluded from the 2027 changes, but their losses also stay within the fund. The calculator models properties held in your own name.

Part-year rental and private use

If the property is a holiday home you also use, or it is rented for part of the year, you can only claim costs for the period it is rented or genuinely available for rent at a market rate. Reduce the weeks rented and scale your costs to match.

Building a rental on vacant land

Since 1 July 2019, holding costs such as interest and rates on vacant land are generally not deductible while a home is built, until the home is finished and available for rent. The first year's loss on a house-and-land purchase is often smaller than investors expect.

Common negative gearing calculation mistakes

The most common negative gearing mistake is treating the 2027 change as if it applied to everyone, or to no one. These errors change the answer by hundreds or thousands of dollars a year.

1. Multiplying by the top rate. On $140,000 with a $20,000 loss the saving is $6,750, not $7,800: an overstatement of $1,050.
2. Deducting principal. On a $600,000 principal and interest loan, counting year-one principal of $7,368.07 overstates the saving by $2,357.78 at 32%.
3. Counting depreciation as cash. Depreciation cuts tax but you never pay it, so it should not appear in your weekly cost.
4. Leaving out the Medicare levy. On a $17,870 loss, ignoring the 2% levy understates the saving by $357.40.
5. Expecting HELP or the surcharge to fall. HELP repayment income and Medicare levy surcharge income add rental losses back.
6. Splitting by agreement. Joint owners must follow the title, not who pays the bills.
7. Assuming full gearing after 1 July 2027. For an established home bought after 12 May 2026, the example's $5,718.40 yearly saving stops from 2027-28.
8. Ignoring vacancy. Two empty weeks at $620 cost $1,240 of rent, or $1,153.20 after a 7% agent fee.

What this estimate does not include

This negative gearing calculator estimates one property's rental result and its tax effect for one year; it is not a full tax return or an investment forecast. It leaves out capital growth and capital gains tax on sale, the Medicare levy surcharge, HELP repayments, family Medicare thresholds, the seniors and pensioners tax offset, and part-year residency.

It also assumes your interest rate and rent stay the same all year, and that your other income is labour income for the Working Australians tax offset in 2027-28. The 2027-28 Medicare low-income threshold uses the latest published figure, $28,011, until the ATO releases a newer one. The mortgage repayment calculator covers loan repayments in more detail.

How close is this estimate?

Close, for the cases it covers. The tax engine reproduces both of Treasury's Budget 2026-27 examples to the dollar: a $14,810 loss is worth $4,761 to someone earning $80,000 and $6,961 to someone earning $210,000. Your actual result depends on your full return, so treat it as a planning figure and confirm with a registered tax agent.