The Strategy Runs on a Marginal Rate You Are About to Lose
A negatively geared property is a cash loss part-funded by a tax deduction. The deduction is worth your marginal rate, so it shrinks as your income falls and disappears entirely for someone living on tax-free super pension payments. The cash shortfall does not shrink at all, which means the strategy becomes progressively more expensive at exactly the point income stops.
- The answer: The after-tax cost of a geared property is the cash shortfall less your marginal rate applied to the tax loss, and that rate falls when you stop working.
- The trap: A tax loss cannot be applied against super pension payments, because they are not assessable income. A retiree with no other income gets no benefit at all.
- The recommendation: Decide before you retire whether the property is being held on its own merits or on the deduction. Only one of those survives the last pay cheque.
Where the AI summary above gets this wrong
"Negative gearing is a good long-term strategy for building retirement wealth."
That's surface-true. Here's what it misses:
- The subsidy ends when the income does — The deduction is worth your marginal rate. A retiree with assessable income below the effective tax-free point receives no benefit from a rental loss at all.
- The rental loss cannot offset super pension payments — Those payments are not assessable income, so there is nothing for the loss to reduce. It carries forward against future assessable income instead.
01 How the value of the deduction changes
The tax saving is the rental loss multiplied by your marginal rate. At the top rate a $15,000 loss returns $6,750; at 16% it returns $2,400; below the effective tax-free point it returns nothing.
The cash shortfall is unchanged. So the same property costs $8,250 out of pocket while working and $15,000 in a year with no assessable income, for identical rent and identical interest.
That transition happens on a known date — the day the salary stops — which makes it one of the few risks in a retirement plan that can be modelled precisely rather than estimated.
Source: ATO — Negative gearing
02 Why a retiree gets no benefit
Super pension payments from a taxed fund after 60 are not assessable income, so a rental loss has nothing to offset. The loss is not lost — it carries forward against future assessable income — but it produces no cash benefit in the year.
For a household whose only other income is a part Age Pension and some deemed investment income, the assessable base is small and the loss will take many years to be absorbed.
That is the specific reason a working-life gearing strategy has to be resolved before retirement rather than carried into it, and the options are in the keep or sell post.
Shows: the after-tax cost of a negatively geared property at your current marginal rate and at your expected retirement rate. Ignores: capital growth, depreciation, the Age Pension assessment of the property, and the carry-forward of an unused tax loss.
03 What to do about it
Convert the loan to principal and interest while you still have employment income, so the shortfall reduces over time and the reversion does not land after you retire.
Or sell, timing the contract into the lowest-income year available and using the concessional cap to absorb part of the gain — the timing argument is in the sale timing post.
Or accept the cost, if the property is genuinely being held for growth and the household can fund the shortfall from other resources. That is a legitimate choice, and it should be a choice rather than a discovery.
A geared property is a bet funded by your marginal rate, and your marginal rate has an expiry date. The shortfall you have been comfortably funding at 45% costs nearly twice as much the year the salary stops. That is a known date and a calculable amount, which makes it the easiest risk in the plan to deal with in advance.
FAQ
How does negative gearing interact with my marginal tax rate as I approach retirement?
The deduction is worth your marginal rate, so it shrinks as your income falls and disappears for someone living on tax-free super pension payments. The cash shortfall is unchanged.
Can a rental loss offset my super pension payments?
No. Those payments are not assessable income, so there is nothing for the loss to reduce. It carries forward against future assessable income instead.
What should I do before retiring?
Convert to principal and interest while you still have employment income, sell in a low-income year, or accept the cost as a deliberate choice — but decide before the last pay cheque rather than after.
Sources
Regulator references
- ATO — Negative gearing · Australian Taxation Office · 2026Negative gearing: when a rental loss can be offset against other income.Last verified: 2026-09-07
- ATO — Tax rates: Australian resident · Australian Taxation Office · 2026The resident marginal rate scale by income year, excluding the Medicare levy.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.