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Australia Rental Income Tax

Free Australia rental income tax calculator. Full deduction of mortgage interest + expenses, taxed at marginal rate (no Section 24 here).

Published

Tax on Australian rental income.

Tax impact

Net rental result

Rent is taxed on the net, not the gross

The ATO does not tax the rent that lands in your account. It taxes what is left after the deductible costs of holding the property. So the figure that matters is net rental income, which is gross rent minus your mortgage interest and minus every other allowable expense. That net result is then added to the rest of your income and taxed at your marginal rate. This calculator does exactly that calculation and, importantly, handles the case most landlords care about: what happens when the property runs at a loss.

Two outcomes: a profit to declare, or a loss to claim

If rent exceeds your interest and expenses, the surplus is positive net rental income and it increases your tax bill at whatever marginal rate applies. If interest and expenses exceed rent, you have a rental loss, and Australia lets you deduct that loss against your other income such as your salary. That is negative gearing. The tax shown here is the change to your bill in either direction: extra tax owed on a profit, or tax saved on a loss.

It helps to be clear eyed about what negative gearing really is. A loss saves you tax, but you still funded the loss out of your own pocket first. Nobody gets richer simply by losing money on rent each year. The strategy only makes sense if you expect the property to grow in value by more than the after tax cost of holding it. When investors talk about negative gearing as a benefit, they mean the tax relief softens the holding cost while they wait for capital growth to do the heavy lifting.

A negatively geared property at 37 percent

Take an investor on the 37 percent marginal bracket with $30,000 of annual rent, $28,000 of mortgage interest, and $7,000 of other deductible costs such as rates, insurance, strata, and property management. The property runs at a $5,000 loss for the year.

Line Amount

The $5,000 loss comes off other income, so at a 37 percent marginal rate the investor's tax bill falls by $1,850. The chart shows how the loss is funded: most of it is real money out of pocket, with the ATO effectively rebating the rest.

The deductions landlords forget, and one they overclaim

The biggest legitimate deduction beyond interest is depreciation, and it is the one most owners miss. Capital works on the building are deductible at 2.5 percent a year over forty years under the rules the ATO administers, and plant and equipment such as ovens and air conditioners can be depreciated too, though the rules tightened in 2017 for second hand items in established properties. A quantity surveyor's depreciation schedule often unlocks thousands in non cash deductions. The flip side is the trap: you can only deduct interest on the portion of the loan used to buy the investment. If you redraw against the property to fund a car or a holiday, that slice of interest is private and not deductible. Keep investment and personal borrowings in separate splits so the ATO can see the line clearly.

Frequently asked questions

Can I get the tax benefit of negative gearing during the year?

Yes, by lodging a PAYG withholding variation with the ATO. It tells your employer to withhold less tax each pay cycle based on your expected rental loss, so you receive the benefit fortnightly rather than waiting for a refund after lodging. Estimate conservatively, because an over claimed variation leaves you with a bill.

How is a jointly owned rental split for tax?

Income and deductions follow the legal ownership shares on the title. A property owned 50 50 splits the net result in half on each owner's return, regardless of who actually pays the mortgage. This matters for couples on different marginal rates, since the loss is more valuable in the hands of the higher earner.

Does this calculator handle capital gains tax when I sell?

No. This tool covers the annual rental result only. Capital gains tax is a separate event triggered when you sell, calculated on the profit and reduced by the 50 percent CGT discount if you held the property for more than twelve months. Use a dedicated capital gains tool for that.

Frequently asked questions

Depreciation?
Plant & equipment depreciation only allowed if you built the property or it was built after 2017. Capital works (Division 43) 2.5%/year over 40 years for buildings.
Can I deduct all of my mortgage interest?
Yes, but only for the portion of the loan actually used to purchase or improve the investment property. If you have redrawn funds for personal use, that part of the interest is not deductible. The ATO requires a clear paper trail, so keep investment and personal loan splits separate from the outset.
What is negative gearing and how does it reduce my tax?
Negative gearing occurs when your deductible property expenses exceed your rental income, producing a net loss. Under Australian tax law, that loss is offset against your other income such as salary, reducing your overall taxable income. The tax saving equals the loss multiplied by your marginal rate, which is most valuable for investors in the 37 percent or 45 percent bracket.
How does the 50 percent CGT discount interact with rental income?
The CGT discount applies when you sell the property, not during annual rental reporting. If you hold the property for more than 12 months, only half of the capital gain is added to your taxable income in the year of sale. Annual rental profits and losses are separate from this and are reported each year on your tax return.

Related calculators

Sources

  1. ATO — Individual Income Tax Rates 2026-27, Australian Taxation Office
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