Enter an interest rate, the term of the loan and the amount you would like to borrow,
to get the minimum monthly repayment and the amount of interest paid.
About the Negative Gearing Calculator
The
Negative Gearing Calculator is designed to give residential property investors
an estimate of the net income effect of owning an investment property. The calculator
combines the cash operating revenue, rent, and the cash operating expenses, with
the change in the amount of income tax paid to measure the net change in the investor's
income due to the investment property.
Assumptions
When calculating the “Change in tax paid” only the marginal tax rates applicable
to Australian residents are used. The calculator does incorporate the Medicare Levy
of 1.5 percent but does not take any other factors which can influence the amount
of tax paid, such as HECS contributions, any rebates, deductions or levies into
account. Building allowance is calculated for investment properties constructed
after 18 July 1985. For buildings where construction began between 19/7/1985 and
15/9/1987 the building allowance is 4 percent of the construction cost, for 25 years
after construction. For investment properties where construction began after 15/9/1987
the building allowance is 2.5 percent of the construction cost, for 40 years after
construction. Depreciation is calculated using the prime cost method. The following
effective lives and depreciation rates are used:
|
Item
|
Effective Life in Years
|
Depreciation Rate if purchased pre 27/2/92
|
Depreciation Rate if purchased post 26/2/92
|
|
Carpets
|
10
|
12
|
17
|
|
Curtains and drapes
|
7
|
18
|
20
|
|
Electric heater
|
10
|
12
|
17
|
|
Furniture and fittings
|
15
|
9
|
13
|
|
Hot water service
|
20
|
6
|
13
|
|
Linoleum and similar floor coverings
|
10
|
12
|
17
|
|
Microwave ovens
|
7
|
18
|
20
|
|
Refrigerators
|
15
|
9
|
13
|
|
Stoves
|
20
|
6
|
13
|
|
Washing machines
|
7
|
18
|
20
|
The calculator does not take any additional laws relating to depreciation into account.
For example, it is possible to treat items under $300 as expenditure and claim the
full amount in the year of purchase. However, the calculator does not apply this
rule, it depreciates the asset over its effective life.
Explanation of Terms
Annual Rental Income: Annual Rental Income is the rental income you receive for
the year. It increases each year by the growth rate input in Potential Rental Growth
per annum.
Annual Loan Repayments: Annual Loan Repayments is the total of loan interest payments
for the year. It is assumed the loan has interest only payments.
Annual Cash Operating Expenses: Annual Cash Operating Expenses is the total of the
tax deductible expenses associated with the property for the year. It increases
by the growth rate input in Estimated Operating Expenses Growth per annum.
Cash Flow: is the cash revenues less the cash expenses. That is Annual Rental Income
less the Annual Loan Repayments and Annual Cash Operating Expenses. This measures
the amount of cash you will receive, if it is a positive number, or the amount you
will have to pay over the year if it is a negative number.
Annual Depreciation: Annual Depreciation is the sum of the depreciation for the
year based on the depreciable items entered. It is calculated using the prime cost
method rather than the diminishing value method. For more information about how
depreciation is calculated see the about page.
Building Allowance: Building Allowance is the tax deduction which can be made for
this property. The rate at which building allowance can be claimed is determined
by when the property was built.
Annual Tax Profit/Loss on Property: Annual Tax Profit/Loss on Property combines
the cash flow generated by the property with the tax deductions to determine the
profit or loss for accounting purposes. As depreciation and building allowance reduce
taxable income, the profit or loss for accounting purposes will be lower than the
cash flow generated.
Change in Tax Paid: The Change in Tax Paid measures the change in the amount of
income tax the investor pays due to owning the investment property, compared to
if they did not own the property. This is calculated based on the annual taxable
income from other sources entered by the user. If the Change in Tax Paid is negative
it means the user pays less tax. If it is positive it means the user pays more tax,
relative to if they had not owned the investment property.
After Tax Profit/Loss on Investment = The After Tax Profit/Loss on Investment combines
the cashflow associated with the investment property with the tax effect of owning
the investment property to measure the net effect of the investment. A positive
number indicates a profit, a negative amount indicates an after tax loss.
Note: the Negative Gearing Calculator is a guide only and should not be considered
investment advice. Before taking out a margin loan you should consult your financial
advisor.