Negative Gearing Reality Check

What this means

No waffle. Just the number and how it was worked out.

Formula used

Calculates annual rental income, total ownership costs, cash shortfall, depreciation-enhanced tax loss, ATO tax benefit, after-tax net cost, gross yield, and capital growth break-even percentage.

Worked example

A$600/week rent, A$3,200/month mortgage, A$1,800 rates, A$1,500 insurance, 8% management, A$2,000 maintenance, A$750k property, A$4,000 depreciation at 32.5% tax: roughly A$8,000 after-tax annual cost requiring ~1.1% annual growth to break even.

Common questions

What is negative gearing?
Negative gearing occurs when the costs of owning an investment property exceed the rental income. The resulting loss can be offset against your other income, reducing your tax bill. The strategy relies on capital growth outpacing the ongoing cash shortfall.

Is negative gearing still worth it in Australia?
It depends on your marginal tax rate, property location, expected capital growth, and how long you plan to hold. High-rate taxpayers benefit more from the tax offset. This calculator shows your actual break-even growth requirement so you can judge whether it's realistic.

What counts as a deductible expense?
The ATO allows deductions for mortgage interest (not principal), council rates, landlord insurance, property management fees, maintenance and repairs, depreciation, and certain other costs. Capital improvements are generally not immediately deductible — check with your accountant.

How is the depreciation claim calculated?
Depreciation covers the wear and tear of the building structure (Division 43) and fixtures and fittings (Division 40). A quantity surveyor's report is the ATO-accepted way to maximise your claim. This tool uses the figure you enter — if you don't have a report, enter 0 and you'll see the conservative case.