How to Use the Negative Gearing Calculator?

1. Property Value: Enter the total value of the investment property in dollars. This should be the current market value or purchase price of the property.

2. Deposit: Input the amount of deposit you’ve put down or plan to put down on the property. This helps calculate the loan amount.

3. Interest Rate: Enter the annual interest rate on your investment property loan as a percentage. For example, if your interest rate is 4.5%, enter 4.5.

4. Annual Rental Income: Input the total amount of rent you expect to receive from the property in a year. Be realistic and consider potential vacancy periods.

5. Annual Expenses: Enter the total annual expenses associated with the property. This should include costs such as property management fees, council rates, insurance, maintenance, and any other recurring expenses.

6. Annual Taxable Income: Enter your total taxable income for the year, including your salary and any other sources of income. This is crucial for calculating your marginal tax rate and potential tax savings.

7. Calculate: After entering all the required information, click the “Calculate” button. The calculator will then process this information and provide you with a detailed breakdown of your investment property’s financial situation:

• Annual Rental Income: This confirms the yearly rental income you entered.
• Total Annual Expenses: This shows the sum of your entered expenses plus the calculated interest expense on your loan.
• Annual Rental Loss: This indicates whether your property is negatively geared (expenses exceed income) and by how much.
• Estimated Tax Saving: Based on your taxable income and the rental loss, this estimates the potential tax deduction you might receive.
• Net Annual Cash Flow: This figure represents the overall financial impact of your investment property, taking into account rental income, expenses, and tax savings.

The calculator also provides a brief explanation of whether your property is negatively or positively geared and what that means for your tax situation.

It’s important to note that while this calculator provides a useful estimate, it doesn’t account for all possible variables and shouldn’t be used as a substitute for professional financial advice. Factors such as capital growth, changes in interest rates, or alterations to tax laws are not considered in this basic calculation.

Using this calculator can help you make more informed decisions about property investments by giving you a clearer picture of the potential financial outcomes. It can assist in comparing different investment opportunities, understanding the impact of changes in interest rates or rental income, and planning for the cash flow requirements of your investment property.