Investment Property Cash Flow Calculator

Pre-tax vs after-tax cash flow

Pre-tax cash flow is what actually leaves your bank account: rent received less repayments and running costs. After-tax cash flow adds back the tax you save when the property runs at a taxable loss. Depreciation is the key difference between the two — it's a deduction you claim without spending a cent, so it improves your after-tax position while leaving pre-tax cash flow untouched.

Negative gearing: current rules and the change investors ask about

Under current Australian tax law, if your deductible costs (interest, running costs, depreciation) exceed your rental income, the loss is deducted against your other taxable income — usually your salary. That's negative gearing, and it's why a property costing $300 a week pre-tax might only cost $180 a week after tax.

The reform that periodically resurfaces is quarantining: rental losses would no longer offset salary, and would instead be carried forward against future rental profits or the eventual capital gain. Nothing in the tax law has changed, but it's the single biggest sensitivity in an investor's holding cost — so this calculator models both. Switch loss treatment to quarantined (or use the what-if button) and you'll see the current-year refund drop to zero, with the loss shown as carried forward instead.

Getting your marginal tax rate right

The tax benefit of a rental loss is worth exactly your marginal rate. Enter your taxable income and the calculator applies the current resident scale — nil to $18,200, then 16%, 30%, 37% and 45% — plus the 2% Medicare levy. A $10,000 rental loss is worth about $3,200 to someone on $100,000 and about $4,700 to someone on $220,000. If you hold the property jointly, model each owner's share at their own rate, or switch to manual entry.

Costs investors routinely forget

• Council rates, water and owners corporation (strata) fees.
• Landlord insurance and building insurance.
• Property management fees plus letting and advertising fees between tenants.
• Repairs and maintenance — budget a realistic annual allowance, not zero.
• Land tax once your holdings pass the state threshold.
• Vacancy — even two weeks a year is roughly 4% of your rent.

Worked example

A $700,000 property returning $600 a week is a 4.5% gross yield. With a $560,000 loan at 6.3% interest only, interest alone is about $35,280 a year against roughly $30,600 of effective rent. Add $6,000 of expenses and management fees and the pre-tax shortfall is around $200 a week — but with $6,000 of depreciation and a 39% marginal rate (37% plus Medicare), the after-tax cost drops considerably. Push the rate up 1% and the shortfall widens by more than $100 a week, which is exactly the kind of test worth running before you buy.

How loan structure changes the numbers

Interest-only repayments maximise short-term cash flow and keep the deductible balance high — useful while you still have non-deductible owner-occupier debt. Principal and interest builds equity faster and usually attracts a lower rate. There's no universally right answer; it depends on your other debts, tax position and how long you plan to hold. The "interest-only ends" scenario shows the repayment jump before it happens.