Negative Gearing Calculator



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Purchase: Negative Gearing Calculator

This calculator helps you establish whether your investment property is positively or negatively geared, and provides you with an estimate of your potential tax benefit.

Assumptions:

This calculator does not take into account annual rent increases, capital growth, or inflation. The total annual expenses is the total of the annual expenses inputted by the user and the repayments produced by the calculator.

Tax

The calculator uses the marginal tax rate as at 2021/2022 and does not take into account the Medicare levy, any other levies, or tax offsets. The tax benefit is the difference between personal income tax without an investment property, and personal income tax while holding an investment property.

Repayments

We assume that:

  • repayments are made on a monthly basis;
  • the interest rate charge is divided equally over 12 monthly payments; and
  • interest is charged to the loan account at the same frequency and on the same day as the repayments are made.

Only your initial repayment amount is calculated and we assume that this repayment amount stays the same throughout the loan term. In reality, repayment amounts can change for a variety of reasons.

What is Negative Gearing and how is it Calculated?

An investment property is negatively geared if the net income you gain from it isn't enough to cover the repayments on the loan.

For example, you've borrowed money for an investment property and have it rented out for $1,600 per month, but each month you have to make loan repayments that costs $2,000 per month and on top of that you, as the landlord, are responsible for maintenance costs of around $300 per month.

While the $700 per month difference from the rental income and the total repayments + maintenance costs is a loss and might not be a profitable investment, you can claim this loss as an income tax deduction.

So if you have an income of $100,000 a year you can claim $8,400 (12 x $700) as an income tax deduction, this lowers your annual taxable income to $91,600.

You can use our Negative Gearing Calculator to help you work out the estimate of the net income from a negatively geared investment property.

Negative Gearing FAQs

Positive gearing is when an investment property generates income, for example through rent, and the amount is more than the cost of loan repayments, maintenance or renovation costs of the property.

The benefit of negative gearing is that the net loss of an investment can be declared as non-taxable income. This is beneficial for people that earn a high income with a high tax rate - because their taxable income will be reduced.

High income households are usually the ones who benefit from negative gearing. Because of the high tax rates that comes from a high income, a negatively geared property investment can help reduce the taxable income.

Positive gearing is when an investment property generates income, for example through rent, and the amount is more than the cost of loan repayments, maintenance or renovation costs of the property.

The benefits of positive gearing include:

  • Passive and steady income
  • Potential to promise capital gains in the long run
  • Positive gearing can decrease cash flow risks
  • Option to add an offset for 0.10%^
  • No monthly or ongoing fees
  • Unlimited redraws
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Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. Rates correct as of 9 October 2024.

^The addition of offset sub-account means your comparison rate will change.