Negative Gearing Australia: Budget Changes
Negative Gearing Calculator Australia: Worked Examples for Property Investors
A negative gearing calculator helps Australian property investors estimate whether a rental property makes a tax loss, how much tax may be saved, and what the after-tax cash cost may be.
This guide uses simple worked examples for salary earners, new investors, existing owners and Budget 2027 negative gearing changes. It is general education only and not personal tax advice.
Key takeaways
- Negative gearing formula: rental income minus deductible expenses equals rental profit or loss.
- Tax saving: rental loss multiplied by marginal tax rate gives an estimate of the tax benefit.
- Cash-flow truth: tax savings reduce the loss but do not remove it.
- Budget 2027: new builds keep broader negative gearing treatment, while established homes bought after Budget night face restricted loss offsets.
- Best use: use the calculator before buying, refinancing or relying on a tax refund to hold a property.
Quick navigation
Last verified: 12 May 2026. Official references: Budget tax reform, ATO interest expenses and ATO rental expense rules.
How does a negative gearing calculator work in Australia?
A negative gearing calculator works by comparing annual rental income with deductible rental expenses. If expenses exceed rent, the property has a rental loss. Under current rules, many investors can offset that loss against other income, but Budget 2027 reforms change this for some established properties.
Calculator formula: Rental income - deductible expenses = rental profit or loss. If the answer is negative, the property is negatively geared.
| Input | Example amount | Notes |
|---|---|---|
| Annual rent | $33,800 | Weekly rent multiplied by 52, adjusted for vacancy. |
| Interest | $41,500 | Only the interest portion is relevant, not principal repayments. |
| Other deductible costs | $8,700 | Rates, insurance, management fees, repairs and other eligible costs. |
| Rental result | -$16,400 | The property is negatively geared by $16,400. |
The ATO says interest on a rental property loan can be claimed when the borrowed amount is used to buy a rental property and the property is rented or genuinely available for rent. Principal repayments are not deductible.
Negative gearing calculator example for a salary earner
A salary earner should calculate the rental loss first, then estimate the tax saving using their marginal tax rate. The after-tax cash cost is the most important number because it shows how much money the investor still needs to fund from salary or savings.
| Step | Amount | Calculation |
|---|---|---|
| Annual rent | $33,800 | $650 x 52 weeks |
| Interest | $41,500 | Investment loan interest |
| Other deductible costs | $8,700 | Rates, insurance, management, repairs |
| Rental loss | $16,400 | $33,800 - $50,200 |
| Estimated tax saving | $6,396 | $16,400 x 39 percent illustrative rate |
| After-tax cash cost | $10,004 | $16,400 - $6,396 |
This investor still pays about $10,004 after tax. The tax refund helps, but it does not turn the property into positive cash flow.
How much tax can negative gearing save?
The tax saving from negative gearing depends on the investor's marginal tax rate. A higher-income investor may receive a larger tax benefit from the same rental loss than a lower-income investor. That is why two people can buy the same property and get different after-tax outcomes.
| Rental loss | Illustrative tax rate | Estimated tax saving | After-tax cash cost |
|---|---|---|---|
| $10,000 | 30 percent | $3,000 | $7,000 |
| $10,000 | 39 percent | $3,900 | $6,100 |
| $10,000 | 47 percent | $4,700 | $5,300 |
These are simplified examples. Actual results depend on taxable income, Medicare levy, ownership percentage, loan purpose, private use, carried-forward losses and final legislation.
How does Budget 2027 change negative gearing calculator results?
Budget 2027 changes the calculator result because some rental losses may no longer reduce salary income immediately. Existing properties held before Budget night keep current treatment. New builds continue to receive broader negative gearing treatment, while established homes bought after Budget night are restricted.
The Budget tax reform page says negative gearing will be limited to new builds from 1 July 2027. It also states that established housing bought after Budget night can use losses against residential property income and carry forward unused losses, but not deduct those losses against wages.
| Property type | Rental loss | Immediate salary offset? | Cash-flow effect |
|---|---|---|---|
| Existing property held before Budget night | $16,400 | Yes, under existing arrangements | Estimated refund may reduce cash cost. |
| New build after reform | $16,400 | Yes, subject to final law | New supply receives tax support. |
| Established home bought after Budget night | $16,400 | No, if only wage income is available | Investor may fund the full loss until losses can be used later. |
Negative gearing calculator for new build vs established property
The same rental loss may produce different tax timing depending on whether the investor buys a new build or an established home. This makes the calculator more useful as a comparison tool than a simple refund estimator.
| Question | New build | Established home after Budget night |
|---|---|---|
| Can rental loss offset wages? | Budget reform indicates yes | Budget reform indicates no |
| Can losses be carried forward? | Subject to normal rules | Yes, unused losses can be carried forward |
| Main investor appeal | Tax support plus new supply | Location, land content or established rental demand |
| Main risk | Developer premium, defects, settlement timing | Less immediate tax relief if negatively geared |
Negative gearing calculator template Australia
Use this template before buying an investment property. It helps estimate the rental loss, tax saving and real after-tax cash cost. For post-Budget purchases, run two versions: one assuming immediate wage offset and one assuming losses are carried forward.
| Line item | Your amount |
|---|---|
| Annual rent | $ |
| Less vacancy allowance | $ |
| Net rent | $ |
| Loan interest | $ |
| Rates, insurance, strata and management fees | $ |
| Repairs and maintenance | $ |
| Other deductible costs | $ |
| Rental profit or loss | $ |
| Estimated tax saving | $ |
| After-tax cash cost | $ |
Common mistakes when calculating negative gearing
The most common mistake is treating every cash outflow as deductible. Principal repayments, private loan redraws and capital costs may not be immediately deductible. Investors should also check whether the property was genuinely available for rent and whether any mixed-use loan needs apportionment.
- Including principal repayments: principal is a loan repayment, not an interest deduction.
- Ignoring private redraws: interest on private-use borrowings must be separated.
- Assuming all repairs are immediate: improvements and capital works may be claimed over time.
- Forgetting vacancy: weeks without rent reduce income and change the result.
- Relying on refund cash flow: Budget 2027 changes may delay the benefit for some established homes.
The ATO separates rental expenses into amounts claimed immediately, amounts claimed over several years and amounts that cannot be claimed.
Related Eduyush guides
For broader context, read the main guide on negative gearing changes, the IAS 40 investment property guide and the accounting terms dictionary.
FAQs on negative gearing calculator Australia
How do I calculate negative gearing?
Add your annual rent, subtract deductible rental expenses, then check whether the result is negative. If the property makes a loss, multiply the loss by your marginal tax rate to estimate the tax saving. The remaining amount is your after-tax cash cost.
Does a negative gearing calculator include principal repayments?
No. A negative gearing calculation should not treat principal repayments as deductible expenses. The ATO says taxpayers cannot claim a deduction for payments made to reduce the principal amount of a loan. Interest may be deductible when linked to earning rental income.
What tax rate should I use for negative gearing?
Use your marginal tax rate, including Medicare levy if relevant. A higher marginal tax rate usually creates a larger tax benefit from the same rental loss. However, the property still has an after-tax cash cost, so the refund should not be treated as profit.
How will Budget 2027 affect negative gearing calculations?
Budget 2027 may change whether a rental loss can reduce salary income immediately. New builds keep broader negative gearing treatment, while established homes bought after Budget night may only offset losses against residential property income and carry forward unused losses.
Is a negatively geared property a good investment?
Not automatically. A negatively geared property loses money before tax and usually depends on future rent growth, capital growth or both. Investors should compare the after-tax cash cost with likely capital growth, vacancy risk, repair costs, interest-rate risk and the new Budget rules.
Disclaimer: This guide is for general education only. Tax outcomes depend on your income, ownership structure, residency, loan purpose, property use and final legislation. Speak with a registered tax agent before acting.
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