What does negative gearing actually save you?

You hold an income-producing investment property. Deductible expenses (interest, rates, insurance, depreciation, repairs) exceed rental income. The resulting loss offsets your other taxable income — salary, dividends, business income — reducing the tax you pay overall. It's not a tax loophole; it's the default treatment under ITAA 1997 s8-1 for any loss-making income-producing asset. Shares do the same thing when margin-loan interest exceeds dividends.

Refund = property loss × your marginal tax rate, capped by the tax you've already paid on other income. If the property runs at a $12,000 loss and you're on the 37% marginal bracket, the refund is ~$4,440. At 45% it's ~$5,400. The calculator above models this exactly — including the cap, so it never overstates what the ATO will actually send back.

Deductions (this year, against this year's income): interest on the loan, council and water rates, insurance, strata admin fund, property management fees, repairs that restore original condition, advertising, land tax. Capital (not deductible this year — flows through depreciation or CGT): structural improvements, extensions, new kitchens, sinking fund contributions, purchase price, stamp duty. Repairs vs improvements is the biggest trap — a new carpet replacing old carpet is repair; tiling over carpet is improvement.

Div 40 (ITAA 1997 s40-25) is plant & equipment — carpet, A/C, blinds, ovens, dishwashers, hot water systems. Diminishing-value method at 200% ÷ effective life per year. Div 43 (s43-10) is capital works — structural building elements from post-15-September-1987 construction. Straight-line 2.5% of original construction cost per year for 40 years. Most investors claim both simultaneously. A quantity surveyor's report quantifies both for you and is itself tax-deductible.

For any investment property worth claiming Div 43 on (building less than 40 years old), yes. The surveyor's report typically identifies $8,000–$20,000 of first-year deductions you wouldn't otherwise capture correctly. At a 37% marginal rate that's $3,000–$7,400 in refund. Report costs $550–$900 and is itself deductible. The ATO requires construction cost substantiation — you can't estimate Div 43 without evidence. Worth it for any building younger than 1987.

Yes. Negative gearing is a loss offset against other taxable income — salary, business, dividends, interest. If you have zero other taxable income (retired on super only, for example), the property loss has nothing to offset and carries forward as a capital-loss-equivalent until you do have income. This is why NG is most powerful for high earners on the 37–45% brackets. The calculator caps the refund at your other income's tax paid, so it won't overstate.

If your property loss exceeds your other taxable income, the unabsorbed portion carries forward to future years automatically. There's no election and no expiry. Next year (or any future year) it offsets rental profit, share gains, business income, or salary — whichever lands first. Trust and company ownership structures can quarantine losses more strictly (they can only offset within the same structure), which is why most small investors hold property in personal names.

Div 43 capital works deductions reduce your CGT cost base at sale under s110-45(2) — so yes, they effectively become taxable gain when you sell. But the gain still gets the 50% CGT discount if you've held 12+ months, so half the recapture is discounted. Div 40 plant & equipment follows its own balancing adjustment at disposal (s40-285). Net effect: depreciation is still worth claiming — you defer tax at your marginal rate today and pay back half of it at sale. At 37% marginal, that's an 18-point effective tax saving per depreciation dollar.

Higher rates make the loss bigger, which makes the refund bigger — but the cash outflow grows faster than the refund. A property costing $20K/yr in interest at 6% creates a ~$7,400 refund at 37% marginal; you still need to find $12,600 out of pocket. So NG helps but doesn't rescue fundamentally bad cashflow. Run the after-tax cashflow number in the calculator. If it's worse than −$150/week sustained, the property needs capital growth above the state average to pay back — otherwise it's a drag on net worth even with the refund.

We don't speculate on politics — we model the current rules. Labor's 2019 proposal grandfathered existing investments and was dropped after the loss. The 2025-26 policy as legislated leaves NG intact. If the rules change, the calculator will be updated within the quarter. Every deduction here is cited to a specific ITAA 1997 section, so any amendment will be visible in our change log. Decide on today's rules — you can't hedge against every possible policy shift.