Negative Gearing Calculator: How Much Tax You Save on an Investment Property

What Is Negative Gearing?

Negative gearing occurs when the expenses of owning an investment property exceed the rental income it generates. This includes costs such as interest on the loan, property management fees, and maintenance. The loss can be deducted from your other income, potentially reducing your taxable income and the tax you pay.

How Does It Reduce Your Tax?

The deduction is applied to your total assessable income. For example, if your rental property operates at a loss of $10,000 in a financial year, you can reduce your taxable income by that amount. The actual tax saving depends on your marginal tax rate. If you’re in the 37% tax bracket, the $10,000 loss could save you $3,700 in tax. This is a simplified example; your situation may vary.

What Expenses Can Be Deducted?

Interest on the investment loan is the most common deduction. Other deductible expenses include property management fees, council rates, insurance, and repairs. You can also claim a deduction for the decline in value of the property’s capital works and certain assets over time. Keep records to support your claims.

How to Calculate Your Tax Saving

To estimate your tax saving, you need to know your net rental loss and your marginal tax rate. Subtract your rental income from your total deductible expenses to find the loss. Then multiply that loss by your marginal tax rate. The result is your potential tax saving. Use our negative gearing calculator Australia tool to get an estimate based on your own figures.

Important Considerations

Negative gearing may not suit everyone. The strategy relies on property values rising to generate a capital gain. You must also consider that tax deductions reduce your tax payable but do not eliminate the underlying loss. Seek professional advice to understand your personal circumstances and ensure you meet all obligations.