This calculator is an educational tool designed simply to provide an understanding of the effects of negative gearing. The results shown here should not be used as the sole basis for any financial decision, without first seeking advice from a qualified accountant.
The goal of our negative gearing calculator is to quickly and easily calculate the tax advantage generated by a negative geared rental property. Hover over any heading with your mouse for a short explanation, only boxes with blue backgrounds need to be filled out.
To determine the tax reduction offered by a negative geared rental property is not as simple as it may seem at first glance, after calculating the net loss generated by the property, the appropriate portion of that loss must be allocated to each owner. The tax advantage for each owner is then calculated by offsetting their portion of the loss against their taxable income, and the resulting reduction of tax becomes the rental property's tax advantage.
If you enter a property value and click "estimate values", the calculator will generate some rough estimates for your rental property's income and expenses. These figures are likely to be inaccurate, but may provide a useful starting point if your not sure. If you already have a good idea of what your rental property's income and expenses will be, you can skip this.
Fill in your best estimate of your rental property's rental income and expenses. Remember, you can only enter information in the boxes with a blue background. If your not sure of an item, then you can always use the Property Value & Estimate Values button to guess a value for you. In the interest row, remember to only include the interest the bank is charging you, rather than the your whole repayment.
Once you have included this information, the negative gearing calculator will be able to provide the taxable profit and loss, along with the cash profit and loss. The taxable profit and loss is the total, and the cash profit and loss excludes non-cash items like depreciation.
Next, adjust the percentage ownership. If there are two owners which are tenants in common, each owner will have a 50% ownership. And finally, input taxable income from other sources, not including this rental property.
Once you have input all of your information, consider the results shown in the final table. "Share of Taxable Profit/Loss" can be seen as the total; the rental income, less all of your deductible expenses. The "Tax Benefit" is the effect that this rental property will have on the amount of tax payable for each owner. This figure is dependent on your level of taxable income from other sources. A reduction in tax payable is shown as a positive number, a negative number means the rental property is turning a profit, and tax will be charged on that profit. The "Share of Cash Profit/Loss" row shows the cash cost of the property, so income less all expenses, excluding non cash expenses like depreciation. And finally, the "Out of Pocket" rows show the total cost to each owner, offset by their tax benefit.
Our negative gearing calculator has been designed to play nicely with your printer, just select print from the file menu in your browser.
We'd love to know what you think of our negative gearing calculator. Many clients have found this to be an incredibly useful tool, and we would love to hear your thoughts or suggestions, on how we can improve it to be even more useful. Please use the link on the right to send us an email.
This simple negative gearing calculator is only able to give you a rough estimate, and is unable to consider your specific situation intelligently. It should be used as an illustration of the effects of negative gearing only, and should not be used as the basis for any decision. If you would like to verify these results or would like more information then by all means, please contact us.
| Generate Estimates | |
|---|---|
| Property Value: | |
| Income and Expenditure | Amount |
|---|---|
| Rent Income: | |
| Interest: | |
| Property Management: | |
| Depreciation: | |
| All Other Costs: | |
| Total Costs: | |
| Taxable Profit/Loss: | |
| Cash Profit/Loss: |
| Owner Details | Owner One | Owner Two |
|---|---|---|
| Percentage Ownership: | ||
| Taxable Income: |
| Results | Total | Owner One | Owner Two |
|---|---|---|---|
| Share of Taxable Profit/Loss: | |||
| Tax Benefit: | |||
| Share of Cash Profit/Loss: | |||
| Annual "Out of Pocket" Cost: | |||
| Weekly "Out of Pocket" Cost: |
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