Negative gearing + rental income calculator

Plug in a property, the loan, expenses, and a depreciation estimate. See the rental loss (or profit), the tax benefit at your marginal rate, and the real after-tax cash position for the year.

The property

Property value (AUD)

Weekly rent (AUD)

Annual rent: $28,600.00 · Gross yield: 4.4%

The loan

Loan balance

Interest rate (%)

Annual interest: $32,240.00

Other expenses

All other cash expenses (rates, insurance, repairs, mgmt, strata, water, land tax)

Depreciation

Building construction cost

Div 43 base — building only, NOT land.

Construction year

Must be after 1987 to claim Div 43.

Annual plant & equipment depreciation (Div 40)

From a quantity surveyor's schedule. Often $0 on second-hand residential.

Your marginal rate

Marginal rate (income tax + 2% Medicare Levy)

Tip: use the income tax calculator to find your exact marginal rate.

Results

Deductions itemised

Gross rent: $28,600.00
− Loan interest: $32,240.00
− Other cash expenses: $6,500.00
− Div 43 building (2.5%): $7,000.00
− Div 40 plant & equipment: $3,500.00
Total deductions: $49,240.00

Tax result

Net rental LOSS: $20,640.00
Tax benefit @ 39.0%: $8,050.00

After-tax cash position

Pre-tax cashflow (rent − interest − cash exp.): -$10,140.00
After-tax cashflow: -$2,090.00
Annual rent rise needed to be cash-neutral: $10,140.00

Depreciation is a non-cash deduction — it lowers tax without changing your bank balance. That's why after-tax cashflow can be very different from the tax loss figure.

Div 40 plant & equipment: since 9 May 2017, residential investors cannot claim depreciation on previously-used assets in a second-hand property. Confirm with your QS schedule.
Forward-looking: federal restrictions to negative gearing for residential property have been flagged for 1 July 2027. Not yet legislated — current rules apply.

What negative gearing actually is (and isn't)

Negative gearing is not a tax concession. It is the ordinary operation of ITAA 1997 s 8-1: if your costs of earning assessable income exceed that income, the net loss is deductible against your other taxable income. Australia applies this rule to rental property the same way it applies it to a sole-trader business that runs at a loss.

Division 43 (capital works) lets you claim 2.5% of the building's original construction cost straight-line over 40 years — but only for builds commenced after 15 Sep 1987. Division 40 (plant & equipment) covers removable assets with their own effective lives. Since 9 May 2017 you generally cannot claim Div 40 on previously-used assets in a second-hand residential property.

Forward-looking warning. The federal government has flagged consultation on restricting negative gearing for residential property from 1 July 2027. This is not current law and no Bill is before Parliament. This calculator applies the rules that apply today.

Frequently asked questions

What is negative gearing, in plain English?+

You borrow to buy an investment property. The yearly costs (loan interest, rates, insurance, repairs, property management, depreciation) are higher than the rent you collect. The shortfall is a rental loss, which you can deduct against your salary, business income, or other taxable income under ITAA 1997 s 8-1. That deduction reduces your overall tax bill — the 'tax benefit' from negative gearing. You are still cash-out-of-pocket each year; the bet is that capital growth more than makes up for the running losses.

What's the difference between Division 43 and Division 40 depreciation?+

Division 43 (capital works) covers the building itself — bricks, concrete, fixed structures. It is claimed at 2.5% straight-line over 40 years, but only for construction that commenced after 15 Sep 1987. Division 40 (plant & equipment) covers removable assets like ovens, carpet, blinds, hot-water systems, air-conditioners. Each asset has its own effective life. A quantity surveyor's depreciation schedule is the usual evidence base for both.

Can I claim Division 40 on a second-hand property?+

Generally no, not on assets that were already in the property when you bought it. Since 9 May 2017, residential investors can only claim Div 40 on assets they install brand-new (Treasury Laws Amendment (Housing Tax Integrity) Act 2017). Commercial property, hotels, and substantially-renovated dwellings have different rules.

Is negative gearing about to be abolished?+

Not currently. As of May 2026 there is no legislation before Parliament that changes the negative-gearing rules. The federal government has flagged consultation around restrictions from 1 July 2027, but this remains a forward-looking proposal — not law. This calculator applies current rules unchanged.

Why does depreciation reduce my tax but not my cash?+

Depreciation is a non-cash deduction. The ATO lets you claim a portion of the building's construction cost and plant assets each year as wear-and-tear, even though no money actually leaves your account. So depreciation lowers your taxable rental result (which lowers tax) without changing rent in or expenses out. That gap is why a property can be cash-flow positive in your bank account but still show a tax loss.

How does the after-tax cash position work?+

Start with rent in, subtract interest and cash expenses (NOT depreciation) — that's pre-tax cashflow. Then add the tax saved by claiming the loss (or subtract the tax owed on a profit). If the result is positive, the property is putting money in your pocket after tax. If negative, you are still subsidising it from other income.

Not financial or tax advice. Estimates based on ITAA 1997 ss 8-1, 25-10 and Divisions 40 and 43, and the ATO Rental Properties guide. Does not model GST (residential rent is input-taxed), land tax thresholds by state, joint ownership splits, foreign-resident surcharges, interest deductibility limits under the "purpose" test, or capital gains tax on disposal. Confirm depreciation entitlement with a registered quantity surveyor and your tax position with a registered tax agent before acting.