Negative Gearing, Worked Out: What a Loss-Making Rental Really Costs After Tax
A $750,000 rental's yearly loss, the tax saved at four salaries, and what's still out of your pocket each week.
By the MoneyBackKit AU team · Updated 28 October 2026 · 3 min read
A property is "negatively geared" when the rent doesn't cover the interest and running costs. The loss is taken off your other income, which cuts your tax. But the tax saving only covers part of the loss; you still pay the rest out of your pocket, betting on the property's value growing.
The example property
| Item | A year |
|---|---|
| Rent collected (2 weeks vacant) | $32,500 |
| Property management (7%) | − $2,275 |
| Rates, insurance, strata, repairs | − $9,000 |
| Interest on $600,000 at 6.2% | − $37,200 |
| Loss before tax | − $15,975 |
After the tax saving
| Your salary | Tax saved | Still out of pocket a year | A week |
|---|---|---|---|
| $70,000 | $5,302 | $10,673 | $205 |
| $120,000 | $5,112 | $10,863 | $209 |
| $160,000 | $6,230 | $9,745 | $187 |
| $220,000 | $7,508 | $8,467 | $163 |
Worth knowing
- The higher your tax rate, the more of the loss the tax system carries, but it's never all of it.
- Depreciation on fittings and the building can add to the deductible loss without costing you cash each year.
- When you sell, the gain is taxed as a capital gain (50% discount after 12 months).
- You can ask the ATO to reduce your withholding during the year (a PAYG withholding variation) instead of waiting for a refund.