Negative Gearing Calculator

What Is Negative Gearing?

Negative gearing is when the cost of owning a rental property is more than the income it generates each year. This creates a loss that can be offset with a tax deduction.

A Negative Gearing Example

Here’s a simplified example of negative gearing:

Savvy investors usually use negative gearing as an investment strategy, as they can claim the loss in income as a tax deduction, which reduces their taxable income.

How Does The Negative Gearing Calculator Work?

Our negative gearing calculator is designed to give an estimate of whether your property is positively or negatively geared.

If your property is negatively geared, the calculator gives you a breakdown from Year 1 to Year 30 of the mortgage, showing every anticipated loss, and also any years in which the property can be expected to generate more income than expenses.

The calculator will ask you for the following information:

• Purchase price
• Deposit amount
• Depreciation (if you choose)
• Interest rate
• Property type (house or unit)
• The growth rate of property
• Number of borrowers
• Income details, including your gross annual income, rental income, and annual increase in rent.
• Annual expenses. This section is pre-populated, but you can change the figures as per your individual situation.

Benefits Of Negatively Geared Property

• Tax deductions: You can deduct the loss from your investment property from your taxable income. This reduces your overall tax liability.
• Leverage: It provides a good opportunity for investors to increase their potential by borrowing money to invest, with the expectation of potential long-term capital growth.
• Potential capital appreciation: Investors anticipate that the property’s value will increase over time, allowing them to make a profit if they sell their property.

Risks Associated With Negatively Geared Investment Property

• Poor cashflow: Negative gearing could lead to a lack of cashflow.
• Market volatility: Negative gearing as a strategy heavily relies on the property’s potential growth to offset the initial losses. The property market is volatile.
• Tax benefits mainly affect high-income earners: The tax benefits of negative gearing primarily benefit people with higher incomes. If your income isn’t high enough, it may not be for you.

Unlock Your Investment Potential!

Take the first step to unlocking the full potential of your property investments. Consult with a mortgage expert to align the results from the negative gearing calculator with your investment goals. Call us on 1300 889 743 or enquire online for free today!