Negative Gearing Strategy Calculator

How to calculate Negative Gearing Strategy Calculator?

This calculator estimates the annual net loss from a rental property and the resulting tax benefit to help you compare using an offset account versus investing those savings.

Key formula: annual_net_loss = (annual_deductible_interest + annual_property_expenses) - annual_rental_income

Using the Negative Gearing Strategy Calculator calculator: an example

Example inputs: property $500,000; loan $400,000; interest 5%; rental income $20,000; expenses $25,000; marginal tax rate 32.5%.

Step-by-step calculation:

• Calculate annual deductible interest: 400,000 × 5% = $20,000.
• Compute annual net loss: (20,000 + 25,000) − 20,000 = $25,000.
• Estimate tax refund: 25,000 × 32.5% = $8,125; after-tax cost = 25,000 − 8,125 = $16,875.
• Compare to offset outcome: interest saved on $25,000 at 5% = $1,250; consider expected investment growth versus immediate tax benefit.

Frequently Asked Questions

What does negative gearing mean?

Negative gearing occurs when a property's deductible costs exceed rental income, producing a loss that can reduce your taxable income.

How is the tax benefit calculated?

Multiply the annual net loss by your marginal tax rate to estimate the tax refund; the calculator uses this to show the net after-tax cost.

Should I choose an offset account or invest the savings?

There is no single correct choice. Consider cash flow, risk tolerance, expected investment returns, and your tax position, or consult a qualified financial adviser.