What would an investment property cost you?
The rent rarely covers the mortgage. See the real weekly out-of-pocket after the tax benefit — and what negative gearing does and doesn't do.
Rates, insurance, management, repairs, strata
Non-cash deduction (a quantity surveyor's estimate)
After tax, this costs you about
$95/week
out of your pocket — $4,920 a year. Gross rental yield 4.1%.
Negatively geared$28,600
−$33,600
−$6,000
−$11,000
+$6,080
−$4,920
Negative gearing turns the $19,000 annual loss into a $6,080 tax refund — but you're still $4,920 a year down. The strategy only pays off if capital growth outweighs that.
Assumes an interest-only loan (interest is the deductible cost) on 2026-27 rates. Depreciation is a non-cash deduction, so it improves the after-tax figure without a cash outlay. Excludes capital growth, CGT on sale, stamp duty, and loan principal. A guide, not financial advice.
Most conversations about a rental stop at “the rent covers most of the mortgage”. The number that decides whether you can hold it is the one underneath: the weekly shortfall left after the tax refund, funded from your salary while you wait on growth.
Negative gearing does not make that shortfall disappear — it refunds tax at your marginal rate on a loss you have already paid in cash. This page keeps three figures apart: the cash position before tax, the taxable result the ATO sees (which includes depreciation, a deduction that never leaves your account), and what you are actually out of pocket.
How this is calculated
- 1
Annualise the rent and the interest
Weekly rent is multiplied by 52 and interest is the loan amount times the rate. The loan is interest-only, so the whole repayment is deductible interest and the balance never shrinks.
- 2
Work out the pre-tax cash position
Annual rent less interest less your other cash costs — rates, insurance, management, strata and repairs. A negative figure is real money leaving your account each year, before tax.
- 3
Subtract depreciation to get the taxable result
Depreciation costs nothing in cash, so the result the ATO assesses is lower than the cash result. Below zero, the property is negatively geared and the loss offsets your other income.
- 4
Run the loss or profit through the tax scale
Income tax plus the Medicare levy is worked out on your income as it stands, then again with the property result added. The difference is your refund or extra tax — no flat marginal rate is used, so bracket changes are captured.
- 5
Add the tax effect back to the cash
After-tax cash flow is the pre-tax position plus the tax benefit, divided by 52 for the weekly headline. Gross yield is annual rent over the purchase price. The advanced section re-runs it across higher rates, vacancy and a ten-year projection.
What it assumes
- The loan is interest-only, so the balance and interest bill stay flat and equity moves only with the property's value. A principal-and-interest loan costs more but builds equity.
- The headline assumes a full year tenanted. The advanced section stress-tests two, four and six weeks vacant — vacancy removes rent while costs keep running.
- Depreciation is whatever you enter — normally from a quantity surveyor's schedule. It usually falls year on year but is held constant here.
- Stamp duty, buying and selling costs, growth and capital gains tax sit outside the headline. Only the advanced projection adds growth, at a rate you set.
- Sole ownership at your marginal rate. Held jointly, rent and deductions split in the ownership shares, which changes the tax benefit — often substantially.
- Resident rates with the standard Medicare levy only: no tax offsets, other deductions, Medicare levy surcharge or study loan.
Common questions
If it's negatively geared, isn't the loss basically free?
No. You fund the whole loss yourself and get only a portion back at your marginal rate. The tool shows both: the taxable loss, and the after-tax hole left in your budget. Only growth closes it.
Why is my tax benefit smaller than my marginal rate times the loss?
A large deductible loss can pull you down through a bracket, so its last slice only saves tax at the lower rate underneath. The calculator recomputes income tax and the 2% Medicare levy at both incomes, rather than applying one rate.
Do I get the refund weekly or at the end of the year?
By default you wait — it arrives when your return is assessed, well after you started funding the shortfall. You can apply to the ATO to vary your PAYG withholding so less tax comes out of each pay.
Should I include depreciation if I don't have a schedule?
Leave it at zero until you do — it is only claimable if properly worked out, usually via a quantity surveyor's report. It is not free either: depreciation claimed reduces the cost base, increasing the capital gain when you sell.
What happens tax-wise when I sell?
Capital gains tax sits outside this calculator. Under current law an individual holding an asset more than 12 months gets a 50% discount on the gain. From 1 July 2027 that discount is replaced with CPI indexation of the cost base plus a 30% minimum tax.
Sources: ATO — Individual income tax rates (residents) · ATO — Medicare levy · Treasury Laws Amendment (Tax Reform No. 1) Act 2026 · All data sources
See also: Capital gains tax · Mortgage repayments · Property vs shares · Rent vs buy
General information only, not financial advice. Figures are estimates based on the inputs and assumptions above and don't account for your personal circumstances. Confirm anything important with the relevant authority or a licensed adviser.