Amp Negative Gearing Calculator

Negative gearing is a tax strategy used by Australian property investors to reduce their taxable income. When your rental income is less than your expenses, you can deduct those expenses from your taxable income, potentially reducing your tax bill to zero or even resulting in a tax refund.

What is Negative Gearing?

Negative gearing occurs when an investor's rental income is insufficient to cover all their property-related expenses. In Australia, property investors can deduct their property expenses from their taxable income, which can lead to a negative taxable income if expenses exceed income.

Negative gearing is only available to Australian residents who are not in the 457 visa program. It's an important strategy for property investors looking to maximize their after-tax returns.

Key Components of Negative Gearing

Rental Income: The money received from tenants for renting the property
Expenses: All costs associated with owning and managing the property, including mortgage interest, council rates, insurance, and maintenance
Taxable Income: Your total income minus allowable deductions
Tax Rate: The percentage of your taxable income that you pay in taxes

How Negative Gearing Works

When your rental income is less than your expenses, the difference becomes a tax deduction. This can result in:

A zero taxable income (no tax to pay)
A negative taxable income (potential tax refund)
Reduced taxable income (lower tax bill)

Negative Gearing Formula:

Negative Gearing = (Rental Income - Expenses) × Tax Rate

If the result is negative, it represents the potential tax refund.

How to Calculate Negative Gearing

Calculating negative gearing involves several steps. Here's a simplified process:

Calculate your total rental income for the year
List all your property-related expenses
Subtract your total expenses from your rental income to find your taxable income
Multiply your taxable income by your marginal tax rate
If the result is negative, you have negative gearing

Common Expenses to Consider

When calculating negative gearing, consider these common property expenses:

Mortgage interest
Council rates
Strata fees (if applicable)
Insurance
Repairs and maintenance
Property management fees
Utilities (if not billed separately to tenants)
Advertising and marketing

Tax Rates in Australia

The tax rate you use depends on your income level. Common marginal tax rates for Australian residents include:

0% - $18,200
19% - $18,201 to $45,000
32.5% - $45,001 to $120,000
37% - $120,001 to $180,000
45% - Over $180,000

Remember that negative gearing calculations can be complex, and the actual tax outcome may vary based on your specific financial situation. It's always a good idea to consult with a tax professional.

AMP Negative Gearing Example

Let's look at an example of how negative gearing works with AMP (Australian Mortgage Pty Ltd) properties.

Example Scenario

Consider a property investor who owns an investment property with the following details:

Annual rental income: $30,000
Annual expenses: $35,000
Marginal tax rate: 32.5%

Calculation Steps

Calculate taxable income: $30,000 (rental income) - $35,000 (expenses) = -$5,000
Calculate negative gearing: -$5,000 × 32.5% = -$1,625

In this example, the investor would have negative gearing of $1,625, which could potentially be claimed as a tax refund.

Worked Example:

Rental Income = $30,000

Expenses = $35,000

Taxable Income = $30,000 - $35,000 = -$5,000

Negative Gearing = -$5,000 × 32.5% = -$1,625

Negative Gearing FAQ

What is the difference between negative gearing and positive cash flow?

Negative gearing refers to the tax benefit of having rental income less than expenses, while positive cash flow means you have more money coming in than going out after all expenses. Negative gearing is a tax strategy, while positive cash flow is a financial performance metric.

Can I negative gear multiple properties?

Yes, you can negative gear multiple properties. Each property's negative gearing can be calculated separately and added together to determine your total negative gearing for the year.

Is negative gearing allowed in all Australian states?

Yes, negative gearing is available to all Australian residents who are not in the 457 visa program. There are no state-specific restrictions on negative gearing.

How does negative gearing affect my personal tax return?

Negative gearing can significantly reduce your taxable income or even result in a tax refund. The amount you can claim as a negative gearing deduction will appear on your tax return as a reduction in your taxable income.