Negative Gearing Calculator — Tax Benefit of Investment Property — Australia 2026
Calculate the tax benefit of negative gearing on your Australian investment property. See how rental losses reduce your taxable income and overall tax.
Negative gearing occurs when your investment property rental income is less than the total expenses (mortgage interest rates body corporate insurance maintenance depreciation). The loss can be offset against your other income reducing your total taxable income and therefore your tax bill. At a marginal tax rate of 37% a $10000 rental loss saves $3700 in tax. Negative gearing remains one of Australia most popular tax strategies for property investors.
How does negative gearing reduce tax?
If your investment property has $30000 rental income and $40000 expenses (including $25000 mortgage interest $8000 depreciation and $7000 other costs) you have a $10000 net rental loss. This $10000 reduces your salary income from say $100000 to $90000 for tax purposes. At 37% marginal rate this saves $3700 in tax.
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Negative Gearing Calculator
How Tax Calculation Works
Income tax is calculated on your total taxable income after deducting eligible exemptions and deductions from your gross income. The tax is applied progressively — you pay a lower rate on initial income slabs and higher rates only on income that exceeds each threshold. This means moving into a "higher tax bracket" does not mean your entire income is taxed at the higher rate. Understanding marginal vs effective tax rate is crucial: your marginal rate applies only to the last rupee earned, while your effective rate is the average across all slabs.
Tax-Saving Strategies
Under the old regime, maximize deductions: Section 80C allows up to Rs 1.5 lakh through PPF, ELSS, EPF, and life insurance. Section 80D covers health insurance premiums up to Rs 25,000 (Rs 50,000 for senior citizens). Section 80CCD(1B) offers an additional Rs 50,000 deduction for NPS contributions. Home loan interest up to Rs 2 lakh is deductible under Section 24. Under the new regime, the Rs 75,000 standard deduction and lower slab rates may save you more if your total deductions are below Rs 3.75 lakh. Calculate under both regimes before choosing.
Key Information
| Parameter | Details |
|---|---|
| Tax Benefit Rate | Equal to your marginal tax rate |
| Common Marginal Rates | 32.5% / 37% / 45% |
| Key Deductions | Interest depreciation insurance repairs |
| Capital Gains Discount | 50% for properties held 12+ months |
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Use Calculator NowFrequently Asked Questions
How does negative gearing reduce tax?
If your investment property has $30000 rental income and $40000 expenses (including $25000 mortgage interest $8000 depreciation and $7000 other costs) you have a $10000 net rental loss. This $10000 reduces your salary income from say $100000 to $90000 for tax purposes. At 37% marginal rate this saves $3700 in tax.
Is negative gearing worth it?
Negative gearing only makes financial sense if the property appreciates in value enough to more than offset the ongoing cash losses. A property losing $10000 per year must appreciate by at least $10000 per year (after capital gains tax) to break even. In strong growth markets like Sydney and Melbourne this has historically been achievable but it is not guaranteed and represents significant risk.
What expenses can I claim on investment property?
Deductible expenses include: mortgage interest (not principal) property management fees insurance council rates water rates body corporate fees repairs and maintenance (not improvements) pest control cleaning advertising for tenants travel to inspect property (limited) and depreciation of building and fixtures. Keep all receipts and consider a quantity surveyor report for depreciation deductions.
Which tax regime should I choose — old or new?
Choose the new regime if your total deductions are below Rs 3.75 lakh. Choose the old regime if you claim HRA, 80C (Rs 1.5L), 80D, home loan interest, and NPS totaling more than Rs 3.75 lakh. Salaried employees can switch every year.
Is income up to Rs 12 lakh really tax-free?
Under the new regime for FY 2025-26, income up to Rs 12 lakh is effectively tax-free due to Section 87A rebate. After Rs 75,000 standard deduction, taxable income is Rs 11.25 lakh which qualifies for full rebate. However, income even slightly above Rs 12 lakh loses this entire benefit.
How can I save more tax legally?
Under the old regime, maximize 80C (Rs 1.5L via PPF, ELSS, EPF), 80D (Rs 25K-50K for health insurance), 80CCD(1B) (Rs 50K for NPS), HRA exemption, and home loan interest (Rs 2L under Section 24).
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Last updated: March 2026