How to read your cash flow result
The calculator shows two key numbers: your pre-tax cash flow (rent minus all cash expenses) and your after-tax cash flow (adjusted for the tax saving or extra tax from your rental position).
Most Australian investment properties in capital cities are negatively geared — the cash expenses exceed the rent. The after-tax cost is lower than the pre-tax cost because the ATO effectively subsidises part of your loss at your marginal rate. At 37%, a $10,000 annual rental loss only costs you $6,300 out of pocket after the $3,700 tax saving.
Depreciation is a powerful lever: it adds to your tax deductions without being a cash expense. A property with $6,000 in annual depreciation at a 37% rate generates $2,220 in tax savings that directly reduce your weekly cost — but doesn't require you to spend any money.
Frequently asked questions
What is investment property cash flow?
Cash flow is the difference between rental income and all cash expenses (mortgage interest, management fees, council rates, insurance, maintenance). If income exceeds expenses, the property is positively geared. If expenses exceed income, it is negatively geared and costs you money each week — but this loss may be offset by a tax saving and future capital growth.
Is negative gearing the same as negative cash flow?
Not exactly. Negative gearing refers to the tax position: when your total deductions (including non-cash items like depreciation) exceed rental income, you have a taxable rental loss that offsets your other income. Negative cash flow simply means your cash expenses exceed your rent. A property can be cash flow negative but less negatively geared than it appears once depreciation creates additional tax deductions without being a cash cost.
Why does depreciation improve my after-tax position?
Depreciation is a non-cash tax deduction — you claim it on your tax return without actually spending the money. A quantity surveyor's depreciation schedule (typically $400–$900 to prepare) can identify $3,000–$10,000 per year in deductions on qualifying properties. At a 37% marginal rate, $6,000 in depreciation saves $2,220 in tax each year, improving your real weekly cost significantly.
What is a 'cash neutral rent'?
The cash neutral rent is the minimum weekly rent needed for your rental income to exactly cover all cash expenses (mortgage interest, management, rates, insurance, maintenance). Below this rent, you're losing cash each week. Above it, you have positive cash flow. Note that the after-tax break-even can be lower than the cash neutral rent once the tax saving from negative gearing is factored in.
Should I use an interest-only or principal-and-interest loan for investment?
Most investors choose interest-only (IO) loans during the accumulation phase because only the interest component is tax-deductible. Principal repayments reduce your debt (which is useful) but are not deductible. IO loans also lower the required cash outflow each period, improving cash flow. This calculator uses interest-only as the default. IO periods are typically limited to 5 years by lenders before converting to P&I.
This calculator assumes interest-only financing and a constant interest rate. Tax saving is received at tax time, not weekly. Does not include stamp duty, CGT, or borrowing costs. Figures are estimates only. Not financial or tax advice — consult a qualified property accountant before making investment decisions.