🏘️ Your Investment Property Details
📊 Annual Cash Flow Breakdown
📈 10-Year Projection
🟢 Green rows = property is positively geared (income exceeds expenses)
| Year | Annual Rent | Annual Expenses | Net Cash Flow | Tax Saving | Property Value |
|---|
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Negative Gearing in Australia: How It Works, Who Benefits, and What's Changing
Negative gearing is one of the most widely used — and most debated — tax strategies for Australian property investors. Over 2 million Australians own negatively geared investment properties, collectively claiming billions in tax deductions each year. Understanding how negative gearing works, whether it makes sense for your situation, and what the upcoming 2027 changes mean is essential for any property investor or would-be investor.
What is Negative Gearing?
A property is negatively geared when the deductible costs of holding it exceed the rental income. The resulting net loss reduces your taxable income — effectively meaning the ATO subsidises part of your holding cost through a lower tax bill.
Deductible expenses include:
- Mortgage interest (not principal) — typically the largest deduction
- Property management fees — typically 7–10% of rent
- Council rates and water rates
- Landlord's insurance
- Repairs and maintenance (not improvements)
- Depreciation (Div 40 plant & equipment + Div 43 capital works) — a powerful non-cash deduction
- Accounting fees related to the property
- Travel to inspect the property (limited — seek advice)
The magic of depreciation: Unlike cash expenses, depreciation is a non-cash deduction — you don't spend anything to claim it, but it reduces your taxable income as if you did. A quality quantity surveyor report (typically $400–$700) on a newer property can add $5,000–$15,000 per year in additional deductions, significantly increasing your tax saving and reducing your weekly out-of-pocket cost.
Who Benefits Most from Negative Gearing?
The tax saving from negative gearing depends entirely on your marginal tax rate. The higher your income, the more each dollar of negative gearing is worth:
| Taxable Income | Marginal Rate | Tax Saving per $10,000 Loss | After-Tax Cost of $10K Loss |
|---|---|---|---|
| $45,001–$135,000 | 32.5% | $3,250 | $6,750 |
| $135,001–$190,000 | 37% | $3,700 | $6,300 |
| $190,001+ | 45% | $4,500 | $5,500 |
This is why negative gearing is most effective for higher-income earners. For someone in the lowest tax bracket, the tax saving may not justify the negative cash flow — the strategy works best when paired with a high marginal rate and strong capital growth expectations.
The Capital Growth Imperative
Negative gearing is a strategy built on an expectation of capital growth. You are accepting a cash flow loss now in exchange for (1) a tax saving, and (2) an asset that grows in value. Without capital growth, negative gearing is simply losing money with a partial tax rebate.
The rule of thumb: Negative gearing makes strategic sense when you expect capital growth to significantly exceed your after-tax holding cost. A property losing $150/week after tax, but growing $40,000/year in value, generates approximately $200/week in net wealth — making it highly positive on a total return basis.
When Does Negative Gearing End? The Path to Positive Gearing
Most properties eventually become positively geared as rents rise over time while the mortgage interest (on a fixed loan) stays constant or the loan is paid down. The break-even point depends on your initial loss, rent growth rate, and whether you pay down the principal. Our calculator's 10-year projection shows exactly when this transition happens for your specific property.
⚠️ Important: Negative Gearing Changes from 2027
2026-27 Federal Budget announcement: From 1 July 2027, investors purchasing established homes will no longer be able to offset rental losses against their personal salary or wage income. Losses will be quarantined to future rental income. Existing properties are grandfathered — properties purchased before 1 July 2027 retain their current negative gearing treatment. New builds are fully exempt from these changes. Always confirm the latest rules with a registered tax agent before purchasing.
This calculator is for general information only. Results are estimates based on 2025-26 ATO rates. Individual tax outcomes vary. Consult a registered tax agent or financial adviser before making investment decisions. The 2027 policy change announcement has not yet been legislated — confirm current rules before purchasing.