Negative gearing is one of the most searched and least understood topics in Australian property investment. Everyone knows the tax deduction exists. Very few investors can tell you exactly what their property actually costs them after tax, week by week, at their specific income bracket.
This calculator changes that. Enter your property figures including purchase price, loan amount, interest rate, rent, expenses, and depreciation and it returns your real after-tax weekly holding cost in seconds. It also shows the same property’s cost at every tax bracket side by side, and calculates your PAYG withholding variation so you know how much extra take-home pay you could access each fortnight instead of waiting for a tax refund.
The calculator below uses the figures from a pre-filled Springfield example. Update the fields with your own property details and click Calculate My Holding Cost to see your personalised result.
Calculate your real after-tax weekly holding cost at your marginal tax rate, with and without depreciation
Property Details
Rental Income
Annual Expenses
Depreciation (Optional)
Your Income and Tax
Results
| Income Range | Marginal Rate | Tax Saving | Real Weekly Cost |
|---|
If you lodge a PAYG withholding variation with the ATO, your employer reduces tax withheld from your salary each fortnight rather than giving you a lump-sum refund at tax time.
Estimated fortnightly tax withheld reduction:
Ask your accountant to lodge a PAYG variation before the start of the financial year based on your estimated property loss.
This calculator provides estimates for general informational purposes only. Results are based on the figures you enter and simplified tax calculations using 2025-26 Australian marginal tax rates. It does not constitute financial, tax, or investment advice. Actual tax outcomes depend on your full income position, deductible borrowing costs, depreciation schedule, ATO assessments, and individual circumstances. Always consult a registered tax agent or accountant before making investment decisions. Stanford Financial does not provide tax advice.
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| What you enter | What the calculator shows |
| Purchase price and loan amount | Annual cashflow shortfall before tax |
| Interest rate and loan type (IO or P&I) | Real after-tax annual cost at your marginal rate |
| Weekly rent and weeks occupied | Real after-tax weekly holding cost |
| All annual expenses (management, rates, insurance, maintenance) | Tax saving at your income bracket |
| Building depreciation (Div 43) and plant depreciation (Div 40) | After-tax cost with and without depreciation |
| Annual income for marginal rate detection | Holding cost at all four tax brackets side by side |
| Â | Estimated PAYG withholding variation (fortnightly tax saving) |
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Most negative gearing calculators show only the annual cashflow shortfall. This calculator goes further: it computes the real after-tax cost at your marginal rate, shows the additional impact of building and plant depreciation separately, compares holding costs across all four tax brackets in a single table, and translates everything into a weekly dollar figure (the number that actually matters for budgeting).
Enter the purchase price and your loan amount. The loan amount determines your annual interest cost, which is typically the largest single expense on an investment property. Select whether your loan is interest only or principal and interest, most investment loans are structured as interest only during the accumulation phase because the interest is fully deductible and IO repayments maximise cashflow.
Enter your expected weekly rent and the number of weeks per year you expect the property to be occupied. A standard assumption is 48 to 50 weeks, allowing for vacancy between tenants. Using 52 weeks overstates your income and understates your real holding cost. If you are yet to secure a tenant, research comparable properties in your target suburb using realestate.com.au or domain.com.au to get a realistic rent estimate.
The calculator breaks expenses into six categories: property management fee (enter as a percentage of gross rent which is typically 7% to 10% in Brisbane and South East Queensland), council rates, building and landlord insurance, maintenance and repairs, water charges not passed to the tenant, and any other recurring expenses such as strata levies or body corporate fees.
The property management fee is entered as a percentage so the calculator applies it to your actual rent figure. Council rates and insurance are entered as annual dollar amounts, check your local council’s rate schedule or contact your insurer for estimates if you are assessing a property before purchase.
The depreciation fields are optional but for new properties they can materially reduce your real holding cost. Division 43 covers the building structure – for a residential property built after 1987, the ATO allows 2.5% of the original construction cost to be claimed annually for up to 40 years. Division 40 covers plant and equipment (carpets, hot water systems, dishwashers, air conditioning units, blinds) depreciated at each asset’s effective life rate.
If you have a quantity surveyor’s depreciation schedule, use those figures directly. If you are pre-purchase estimating, a rough guide for a new three to four bedroom house in Brisbane is $8,000 to $14,000 in combined annual depreciation in the first few years, declining over time as plant assets are fully depreciated. For established properties built before 1987, Division 43 does not apply and Division 40 is restricted to brand new assets installed after your purchase date.
A quantity surveyor’s depreciation schedule for a new property typically costs $500 to $800 and generates deductions that save a multiple of that cost in the first year alone. It is one of the most cost-effective professional services available to a property investor and should be arranged before the first tax return lodgement.
Enter your annual income before the property loss. The calculator automatically detects your marginal tax rate from the 2025-26 tax bracket schedule and applies it to your property loss. You can also override this with a manual rate if your situation is more complex: for example, if you hold the property in a trust, if you have significant other investment deductions, or if you are in the Medicare Levy Surcharge threshold.
The following table shows indicative after-tax weekly holding costs for a new three-bedroom investment house in Brisbane at different purchase prices, assuming a $550 per week rent, 50 weeks occupied, 90% IO loan at 6.5%, standard expenses, and a 37% marginal tax rate. Depreciation is not included in these figures.
| Purchase Price | Loan (90%) | Gross Yield ($550/wk) | Pre-Tax Loss | After-Tax Weekly (37%) |
| $500,000 | $450,000 | 5.72% | –$13,550 | $164/wk |
| $600,000 | $540,000 | 4.77% | –$18,660 | $226/wk |
| $650,000 | $585,000 | 4.40% | –$21,263 | $258/wk |
| $700,000 | $630,000 | 4.09% | –$23,865 | $289/wk |
| $750,000 | $675,000 | 3.81% | –$26,468 | $321/wk |
These figures illustrate the trade-off between purchase price and holding cost. A $100,000 increase in purchase price at 90% LVR adds approximately $65 per week to the real after-tax holding cost at a 37% tax bracket. Use the calculator above with your specific figures including rent estimates, actual expenses, and your income to get a more accurate result for your target property.
Negative gearing is when an investment property’s costs — principally loan interest, management fees, rates, insurance, and maintenance — exceed the rental income it generates. The resulting net loss is deductible against your other assessable income, which reduces the income tax you pay for that financial year.
The term comes from the concept of “gearing” — borrowing to invest. “Negative” means the return (rent) is less than the cost of the debt (interest plus expenses). In Australia, this deduction is available on any income-producing asset, but it is most commonly associated with investment property because residential property debt is the largest and most common form of investor borrowing in the country.
The deduction does not eliminate the loss as it offsets it partially through the tax system. A $20,000 annual property loss does not disappear. It reduces your taxable income by $20,000, and the tax saving from that reduction depends on your marginal tax rate:
This is why negative gearing is more valuable to higher income earners — the same property at the same loss costs a top-bracket investor $100 per week less than someone in the 32.5% bracket. The tax system partially redistributes the holding cost advantage toward those with higher marginal rates.
Depreciation is a non-cash deduction — it reduces your taxable income without requiring any additional cash outlay in the year it is claimed. It is the most powerful and most underutilised deduction available to investment property owners, particularly those with new or recently built properties.
For residential properties constructed after 16 September 1987, the ATO allows the original construction cost to be depreciated at 2.5% per year over 40 years. This is known as the capital works deduction or Division 43 allowance. On a new Springfield house with a construction cost of $380,000, the annual Division 43 deduction is $9,500 — a figure that reduces your taxable property loss by $9,500 without costing you anything in cash that year.
Properties built before this date do not qualify for Division 43. For established properties, only construction costs incurred on extensions, renovations, or improvements after September 1987 can be depreciated at 2.5%.
Carpets, hot water systems, dishwashers, ovens, range hoods, ceiling fans, air conditioning units, blinds, and other fixtures and fittings are depreciated separately under Division 40 at each item’s effective life rate determined by the ATO. For a brand new property with a full fixture package, Division 40 depreciation can add $3,000 to $6,000 in deductions in the first year, declining as each asset reaches the end of its effective life.
Important: for properties purchased after 1 July 2017, Division 40 depreciation on used plant and equipment is no longer available. Only brand new items installed by you after settlement can be claimed. For new off-the-plan properties, all plant is new and the full Division 40 schedule applies.
To claim depreciation, you need a tax depreciation schedule prepared by a registered quantity surveyor. The schedule documents every depreciable asset, its effective life, and the annual deduction available under both the prime cost and diminishing value methods. Your accountant uses this schedule to prepare your tax return. The schedule is a one-time cost typically ranging from $500 to $800 for a standard residential investment property.
The calculator includes separate fields for Division 43 and Division 40 depreciation so you can see exactly how each component affects your real weekly holding cost. For a new $650,000 Brisbane property, including $12,700 in total annual depreciation reduces the real after-tax weekly cost from approximately $258 to $211 per week at the 37% bracket which is a difference of $47 per week or $2,444 per year.
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How depreciation reduces your weekly holding cost
$650,000 new Springfield house · 37% tax bracket · Div 43: $9,500/yr · Div 40: $3,200/yr
Without depreciation
$255/wk
With Div 43 only
$187/wk
With Div 43 + Div 40
$165/wk
A $700 quantity surveyor's schedule unlocks approximately $4,700 per year in additional tax savings on this property through depreciation deductions that require no additional cash outlay.
The honest answer depends entirely on your investment thesis, not the tax deduction. Negative gearing reduces your holding cost while you wait for capital growth. It does not create capital growth. A poorly located property with weak growth fundamentals costs you money whether it is negatively geared or not — the tax saving simply slows the rate at which you lose.
The after-tax weekly holding cost is the right number to start with. For a 37% bracket investor buying a $650,000 new property in Springfield with $550 per week rent, the real cost is approximately $211 per week including depreciation. Whether $211 per week is worth holding a $650,000 growth asset for seven to ten years depends on your view of capital growth in that location, your confidence in sustaining the holding cost through rate rises and vacancy periods, and whether the property fits within your overall financial plan.
A property that grows at 6% per annum doubles in value approximately every 12 years. On a $650,000 property, that trajectory implies approximately $40,000 in annual capital gain during the growth phase. Against a $211 per week ($10,972 per year) holding cost, the leverage arithmetic is compelling if the growth thesis is right.
Negative gearing does not make sense if the property itself is a poor investment such as overpriced, in a low-growth market, or subject to demand risks that undermine the rental yield. The tax saving is worth at most 45 cents in the dollar on the loss. It does not compensate for a property that fails to grow.
It also does not make sense if the weekly holding cost, after tax and PAYG variation, creates genuine financial stress. An investor who is one vacancy or one rate rise away from distress is not in a position to benefit from long-term capital growth as they may be forced to sell at the wrong time.
Stanford Financial does not provide property investment advice. We recommend working with a licensed buyer’s agent or property adviser to identify the right property before engaging us to arrange the finance. Our role is structuring the loan correctly once the investment decision has been made.
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PAYG withholding variation: two ways to receive your tax saving
Based on $7,800 annual tax saving at 37% bracket (no depreciation) or $12,500 including Div 43 + Div 40 depreciation
Monthly cashflow improvement with variation
$650/month
Including Div 43 + Div 40 depreciation
+$480/fortnight
The calculator shows your real after-tax annual and weekly holding cost for a negatively geared investment property. It accounts for rental income, all common expenses including property management and council rates, loan interest, building and plant depreciation, and your marginal income tax rate. It also shows a tax bracket comparison table and an estimate of the PAYG withholding variation you could apply for to receive your tax saving fortnightly rather than as an annual refund.
To calculate negative gearing: take your gross annual rent and subtract all deductible annual expenses (interest, management fees, council rates, insurance, maintenance, water, and other costs). The result is your net annual cashflow. If negative, multiply the loss by your marginal tax rate to find the tax saving. Subtract the tax saving from the loss to find your real after-tax annual cost. Divide by 52 for the weekly figure. The calculator above automates this entire process including the depreciation and PAYG variation components.
Both figures are useful. The cash holding cost is calculated without depreciation, this is the real money you need to come up with each week. The tax holding cost includes depreciation — this is your actual taxable property loss, which determines how much your tax bill reduces. The calculator shows both so you can understand the cash requirement and the tax benefit separately.
Division 43 (capital works) covers the building structure — the construction cost depreciated at 2.5% per year for up to 40 years. Division 40 (plant and equipment) covers fixtures and fittings (carpets, hot water systems, air conditioning, blinds) depreciated at individual asset rates. Division 43 is available on properties built after September 1987. Division 40 on used assets was disallowed from 1 July 2017 and only applies to brand new items purchased or installed after your settlement date.
Yes, to claim building and plant depreciation in your tax return you need a depreciation schedule prepared by a registered quantity surveyor. Your accountant cannot generate this — it requires a QS inspection and report. The cost is typically $500 to $800 for a standard residential property and is itself fully tax-deductible as a property expense.
A PAYG withholding variation is an application to the ATO that reduces the tax withheld from your salary each fortnight, based on your expected investment property loss for the year. Instead of waiting for a tax refund after lodging your return, you receive the tax saving as additional take-home pay throughout the year. It is particularly useful for investors managing a weekly cashflow shortfall on a new property. Your accountant lodges the application as it must be renewed each financial year and reviewed if your income or property circumstances change.
Stanford Financial compares investment loans across 50 plus lenders to find the right rate and structure for your property purchase. We set up the loan splits correctly from day one to maximise your deductible interest, and can coordinate with your accountant or quantity surveyor on the depreciation and PAYG variation process.
Call 0483 980 002 or book your free assessment online. We typically respond within one business day.
