What is negative gearing in Australia?

Negative gearing is when the deductible costs of an investment property (interest, expenses, depreciation) exceed rental income. The net loss is deducted from your other taxable income, reducing your income tax at your marginal rate.

How much tax do I save with negative gearing?

Your rental loss multiplied by your marginal tax rate plus the 2% Medicare levy. A $15,000 loss saves about $4,800 at the 30% bracket, $5,850 at 37%, or $7,050 at 45%.

Is negative gearing changing in 2026?

The May 2026 Federal Budget announced reforms from 1 July 2027 restricting negative gearing on established properties purchased after 12 May 2026. New builds keep full deductibility and earlier purchases are grandfathered. Legislation is not yet final.

Is negative gearing worth it?

Only if long-term capital growth exceeds your accumulated after-tax losses. The tax deduction refunds just your marginal rate — a $10,000 annual cash loss still costs $5,000-$7,000 after tax each year that growth must recover.

Negative Gearing Calculator Australia 2026-27

Calculate the tax benefit of a negatively geared investment property: rental loss, tax deduction at your marginal rate, and the true after-tax holding cost per week.

Property & Income Details

Your Taxable Income ($/year)

Weekly Rent ($)

Loan Amount ($)

Interest Rate (% p.a.)

Other Expenses ($/year)

Depreciation ($/year, optional)

Results

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How Negative Gearing Works in Australia

A property is negatively geared when the deductible costs of owning it — loan interest, agent fees, rates, insurance, maintenance, and depreciation — exceed the rental income. Under current law, that net rental loss is deducted against your other income (like salary), reducing your income tax at your marginal rate.

The higher your marginal tax rate, the larger the subsidy: a $15,000 rental loss saves a 47%-bracket earner about $7,050 in tax, but only $4,800 for someone in the 30% bracket. This is why negative gearing is most valuable for high earners — and why the strategy only makes sense if capital growth ultimately outpaces the accumulated after-tax losses.

2026 Budget reforms: what changes

The May 2026 Federal Budget announced reforms commencing 1 July 2027 that restrict negative gearing deductions for established (existing) investment properties purchased after 7:30pm on 12 May 2026. New-build purchases retain full deductibility, and properties bought before the cut-off are grandfathered. The legislation has not yet been enacted, so final rules may change — but the direction favours new construction. If you are weighing an established versus new investment property, this asymmetry now materially affects the numbers.

Key points investors miss

Depreciation is the quiet hero: on new builds, capital works and fittings depreciation can add $8,000–$12,000/year of non-cash deductions — tax savings without spending a dollar.
Losses are a real cost: the tax deduction refunds only your marginal rate. A $10,000 cash loss still costs you $5,300–$7,000 after tax. You need capital growth above that to come out ahead.
CGT interacts: when you sell, capital gains tax applies (with a 50% discount after 12 months under current rules). Model your exit with the CGT calculator.
Yield matters more as rates rise: check the property's gross and net yield with the rental yield calculator before assuming gearing losses are manageable.

See how a rental loss changes your take-home pay with our pay calculator, or estimate purchase costs with the stamp duty calculator.