Negative Gearing Calculator Australia: Work Out Your Real After-Tax Property Cost

This page is designed to help you calculate the true after-tax cost of a negatively geared investment property. Most negative gearing calculators online return a single number without explaining the inputs or the 2026 rule changes. This one walks through each step so you understand what the number means and how to change it.

The short version: negative gearing reduces your taxable income by the amount your property loses each year, generating a tax refund that partially offsets your out-of-pocket cost. The after-tax cost is what matters — and under 2026 rules it has changed for new purchases.

Every number in a negative gearing calculation depends on your marginal tax rate. The higher your rate, the more the government subsidises your property losses. Use the 2025-26 Australian individual tax rates below (including 2% Medicare levy):

Taxable income up to $18,200: 0% effective rate
$18,201 to $45,000: 19% plus 2% Medicare = 21% effective on that slice
$45,001 to $135,000: 32.5% plus 2% Medicare = 34.5% effective
$135,001 to $190,000: 37% plus 2% Medicare = 39% effective
Above $190,000: 45% plus 2% Medicare = 47% effective

For the negative gearing calculation, use the marginal rate that applies to the top dollar of your income — because that is the rate applied to the additional deduction. If your total income is $160,000, your marginal rate is 39% (37% + Medicare). Every $1,000 in additional deductions saves you $390 in tax.

Your number: Write down your total taxable income (salary plus other income), find the bracket above, and note the marginal rate. You will use this rate throughout the calculation.

Annual rental income = Weekly rent × 52, adjusted for vacancy.

Most lenders and advisers use a vacancy allowance of 2 to 4 weeks per year. A conservative estimate uses 4 weeks vacancy (approximately 7.7%).

Example: Property renting at $580 per week
Gross annual rent = $580 × 52 = $30,160
Less 4 weeks vacancy = $580 × 4 = $2,320
Net annual rental income = $30,160 - $2,320 = $27,840

Your number: Weekly rent × 48 (using 4 weeks vacancy as a conservative baseline) = your net annual rental income.

Add up all deductible expenses for the year. These are the costs that reduce your taxable rental income and create the negative gearing loss.

Loan interest: Loan balance × interest rate. On an interest-only loan of $560,000 at 6.8%, this is $38,080 per year. On a principal and interest loan the interest component reduces each year — use your current year interest figure from your lender statement.

Property management fees: Typically 8 to 10% of gross rent including GST. On $30,160 gross rent at 8.5%, this is approximately $2,564.

Council rates: Varies by council. Use $1,500 to $2,500 as a typical range for a suburban house.

Water rates: Approximately $800 to $1,200 per year depending on state and usage.

Landlord insurance: Approximately $1,200 to $2,000 per year.

Repairs and maintenance: Budget 0.5% to 1% of property value. On a $700,000 property, this is $3,500 to $7,000 per year. Use $4,000 as a conservative estimate for a well-maintained property.

Accounting/tax agent fees: Approximately $300 to $600 for rental property tax return preparation.

Depreciation (Division 43 capital works): 2.5% of original construction cost per year. If the property cost $300,000 to build (not the purchase price — just the construction component), this is $7,500 per year. For post-2017 purchases of established properties, Division 40 plant and equipment deductions are restricted.

Example total deductible expenses:
Loan interest: $38,080
Property management: $2,564
Council rates: $1,800
Water rates: $900
Landlord insurance: $1,400
Repairs and maintenance: $4,000
Accounting: $400
Depreciation: $6,000
Total deductible expenses: $55,144

Tax loss = Total deductible expenses minus net annual rental income.

Example:
Total deductible expenses: $55,144
Net rental income: $27,840
Annual tax loss: $55,144 - $27,840 = $27,304

This is the amount by which your taxable income is reduced. It is offset against your salary and other income in the same financial year, reducing your tax bill by the tax loss multiplied by your marginal rate.

Your number: Total deductible expenses (from Step 3) minus net annual rental income (from Step 2) = your annual tax loss.

Tax benefit = Annual tax loss × marginal tax rate.

Example at 47% marginal rate:
Tax loss: $27,304
Tax benefit: $27,304 × 0.47 = $12,833 per year

At 39% marginal rate:
$27,304 × 0.39 = $10,649 per year

At 34.5% marginal rate:
$27,304 × 0.345 = $9,420 per year

This tax benefit comes back to you as a reduced tax bill, which you can receive either at year end through your tax return, or throughout the year by lodging a PAYG Withholding Variation with the ATO (which reduces tax withheld from your salary each pay period, giving you the benefit in real time).

Your number: Your annual tax loss (Step 4) × your marginal rate (Step 1) = your annual tax benefit.

After-tax annual cost = Total deductible expenses - rental income - tax benefit.

More simply: after-tax cost = annual tax loss - tax benefit.

Example at 47% marginal rate:
Annual tax loss: $27,304
Tax benefit (at 47%): $12,833
After-tax annual cost: $27,304 - $12,833 = $14,471 per year ($1,206 per month)

This is the real out-of-pocket cost of holding the property after accounting for the ATO refund. You are not paying $27,304 per year — the government effectively pays $12,833 of it. You pay $14,471.

Your number: Annual tax loss minus tax benefit = your real after-tax annual cost.

A negatively geared investment property makes financial sense if the capital growth exceeds the after-tax cost over your holding period. Run a simple sense check:

Required annual growth to break even in 10 years:
After-tax cost over 10 years: $14,471 × 10 = $144,710
Property purchase price: $700,000
Required capital growth just to cover after-tax losses: $144,710 on a $700,000 property = 20.7% total over 10 years, or approximately 1.9% per year.

That is the minimum growth rate required just to get your money back on the after-tax costs. Any growth above that is profit. At 6% annual growth, the property would be worth approximately $1,253,000 after 10 years — a gain of $553,000 against a total after-tax cost of $144,710. The investment works comfortably.

At 2% annual growth, the property would be worth approximately $854,000 — a gain of $154,000 against $144,710 in after-tax costs. Barely profitable, and that is before accounting for the opportunity cost of the deposit capital. In a low-growth market, negative gearing does not work.

The negative gearing calculation above applies to properties already held and to established properties purchased before the 2026 budget cutoff date. For new residential investment property purchases after the cutoff, the rules changed.

What changed: For new purchases after the cutoff, rental property losses cannot be immediately offset against salary income in the year they arise. Instead, the losses are quarantined and can only be offset against future rental income or capital gains from the same property.

What this means for the calculator: Steps 1 to 6 above remain the correct calculation for your existing properties and for properties purchased before the cutoff. For new purchases after the cutoff, the tax benefit in Step 5 is deferred rather than received in the year of the loss. You still get the deduction eventually — but not until you have rental income or a capital gain to offset it against.

The practical impact: Your after-tax annual cost in Step 6 increases for new purchases — because you are carrying the full loss without the annual tax refund to offset it. On the example above, instead of $14,471 per year after tax, you would be carrying $27,304 per year until you have rental income or a capital gain to apply the deferred losses against. This is a significant increase in carry cost.

For the full picture on what the 2026 changes mean: negative gearing Australia: what it is, how it works, and whether it still makes sense in 2026. And for what changed in detail: what is actually changing with negative gearing in 2027.

Using the same property as above ($700,000 purchase, $560,000 IO loan at 6.8%, $580/week rent, $55,144 total deductible expenses, $27,840 net rental income, $27,304 annual tax loss):

Income $90,000 (marginal rate 34.5%):
Tax benefit: $27,304 × 34.5% = $9,420
After-tax annual cost: $27,304 - $9,420 = $17,884 ($1,490/month)
After-tax monthly cost as % of take-home pay: approximately 13%

Income $150,000 (marginal rate 39%):
Tax benefit: $27,304 × 39% = $10,649
After-tax annual cost: $27,304 - $10,649 = $16,655 ($1,388/month)
After-tax monthly cost as % of take-home pay: approximately 9%

Income $200,000 (marginal rate 47%):
Tax benefit: $27,304 × 47% = $12,833
After-tax annual cost: $27,304 - $12,833 = $14,471 ($1,206/month)
After-tax monthly cost as % of take-home pay: approximately 6%

The pattern is clear: the higher your income, the less negative gearing costs you after tax, because the government effectively subsidises a larger proportion of your loss. This is why negative gearing has historically been most attractive to high-income earners, and why the 2026 rule change for new purchases was targeted specifically at this mechanism.

Most investors receive their negative gearing tax benefit as a lump sum when they lodge their tax return. This means carrying the full out-of-pocket cost throughout the year and receiving a large refund in July or August.

An alternative is to lodge a PAYG Withholding Variation (also called an Income Tax Withholding Variation) with the ATO. This is a form you lodge with the ATO that instructs your employer to reduce the tax withheld from your salary, effectively giving you the negative gearing tax benefit in each pay period rather than as a lump sum at year end.

On the example above (tax benefit $12,833 per year at 47%), a withholding variation would reduce your tax withholding by approximately $1,069 per month. Instead of carrying $27,304 per year and receiving a refund, you would carry approximately $15,471 and receive the benefit in real time.

The variation must be lodged fresh each financial year and requires an accurate estimate of your expected rental income and deductions. Your accountant can prepare this — it typically takes 3 to 4 weeks for the ATO to process and update your withholding rate with your employer.

Get Your Numbers Run by a Specialist

If you want the negative gearing calculation done for your specific property, income, and situation, a 20-minute call with our team will give you the exact figures.

Book a free 20-minute strategy call at: https://www.ausretirementoffice.com.au/book

Disclaimer: The information provided by Australian Retirement Office is general in nature and educational only. It does not constitute financial product advice, legal advice, or taxation advice, and does not take into account your objectives, financial situation, or needs. Australian Retirement Office does not hold an Australian Financial Services Licence (AFSL). Where appropriate, we may refer you to licensed professionals within our partner network. We may receive referral fees for these introductions. All investments carry risk, including potential loss of capital. Past performance is not a reliable indicator of future returns. You should obtain professional advice and review all relevant Product Disclosure Statements (PDS) before making any financial decisions.

Related reading: Negative Gearing Australia: What It Is and Whether It Still Works | What Is Actually Changing With Negative Gearing in 2027 | Investment Property Depreciation: How to Claim It | Interest-Only Loans: Still Worth It in 2026? | The Step-by-Step Australian Property Investment Strategy