Is Negative Gearing Still a Winning Strategy in 2026?
Negative gearing is an investment strategy where the costs of owning a rental property (interest, maintenance, etc.) exceed the rental income, resulting in a taxable loss. That loss can be offset against other income (like your salary), reducing your overall tax bill. This calculator helps you estimate the tax benefit of negative gearing based on your marginal tax rate.
FAQ
Q1: How does negative gearing work in Australia?
If your rental property's deductible expenses (loan interest, council rates, repairs, depreciation, management fees, etc.) exceed the rental income, you have a net rental loss. You can deduct that loss from your other income (salary, business income) when lodging your tax return, thereby reducing your taxable income and tax payable. The ATO allows this offset, making negative gearing a popular investment strategy. However, you must still cover the cash shortfall out-of-pocket each year.
Q2: What expenses can I claim against rental income?
Common deductible expenses include: loan interest (not principal repayment), council rates, water rates, strata fees (for units/apartments), property management fees, advertising for tenants, maintenance and repairs (not improvements), building and landlord insurance, depreciation of plant and equipment (depreciating assets) and the building itself (capital works deductions), utilities (if paid by you), land tax, and legal fees related to tenancy. Keep all receipts.
Q3: Is negative gearing a good investment strategy?
Negative gearing relies on two potential benefits: (1) Tax savings now, and (2) Capital growth in property value over time. It can be beneficial if the property appreciates enough to outweigh the ongoing cash losses. However, it's not without risk: property values can stagnate or fall, interest rates can rise, and you must have sufficient cash flow to cover the shortfall. Many investors prefer positively geared properties (net income positive) for passive income. Consider your overall portfolio, risk tolerance, and investment goals. Consult a financial adviser.
Q4: Do I need to apply the 2% land tax or other state taxes?
Yes, if you own land/ investment property, you may also be liable for state land taxes (if value exceeds threshold) and council rates. These are deductible expenses that can be included in your negative gearing calculation, potentially increasing your loss and tax benefit. Use our Land Tax Calculator (by state) to estimate those costs and include them here as "Property Expenses".
Note: Tax laws can change. The benefits of negative gearing have been subject to political debate. Always verify current rules with the Australian Taxation Office (ATO) or your tax agent.