The Year the Rent Overtakes the Interest
A negatively geared property does not stay negatively geared. Rents rise with inflation while a principal-and-interest loan shrinks, so at some point the rent exceeds the deductible costs and the property starts producing taxable income instead of a deduction. When that crossover happens is worth knowing, because it changes both the cash flow and the tax.
- The answer: The crossover arrives when rent exceeds interest plus the other deductible costs, driven by rent growth, loan amortisation and rate movements.
- The trap: Positive gearing after retirement is taxable income assessed against a much lower marginal rate — and it is also assessable for the Age Pension income test.
- The recommendation: Model the crossover year against your retirement date. A property that turns positive while you are still working is a different proposition from one that turns positive afterwards.
Where the AI summary above gets this wrong
"Negative gearing works because you claim the losses against your income every year."
That's surface-true. Here's what it misses:
- The losses do not continue indefinitely — Rent growth and loan amortisation close the gap, so a property held long enough stops producing a deduction and starts producing taxable income.
- The crossover is usually good news and it is not free — Positive cash flow is the point of holding the asset, and it brings taxable income and an Age Pension assessment with it.
01 What moves the crossover
Three things close the gap. Rent rises roughly with inflation over long periods. A principal-and-interest loan shrinks, so the interest falls each year. And rate movements shift the interest in either direction.
An interest-only loan removes the second of those, which is why interest-only arrangements keep a property negatively geared for longer. That is sometimes the intention and it also means the debt is not reducing.
Depreciation works the other way from cash flow. A property can be cash-flow positive and still produce a tax loss because of the capital works deduction, which is a non-cash amount — the interaction is in the depreciation post.
Source: ATO — Negative gearing
02 Why the timing matters
While you are working, a loss is deducted against a high marginal rate and income is taxed at one. After retirement, a loss is worth much less and income is taxed at much less — the same property in the same year behaves differently either side of the date you stop work.
A property that turns positive shortly before retirement is therefore well timed: the deduction was worth most while it existed and the income arrives when the rate is lowest.
One that stays negative into retirement is badly timed. The deduction is worth little against a small taxable income, and the household is funding a cash shortfall out of retirement savings.
Shows: the year a negatively geared property turns positive, from rent growth and the reduction in interest as the loan is repaid. Ignores: rate movements, vacancy, depreciation, which is not a cash cost, and capital growth in the property.
03 The Age Pension consequence
Net rent is assessable income for the Age Pension income test — the actual figure, not a deemed one, which is one of the few places actual income is used. The property itself is an assessable asset at market value.
That combination is harsh for a property with a low yield relative to its value. The assets test counts the whole value at the $3 per $1,000 taper described in the assets taper reference, while the income it produces is modest.
It is also why the sale decision and the retirement date interact. Holding a low-yield property into pension age costs pension on the full value; selling converts it into a financial asset that is deemed instead, which may be more or less.
The crossover year is the one number I would want before retiring with a geared property. If it lands after you stop work, you are funding a cash shortfall out of your retirement savings for a deduction worth a fraction of what it used to be. That is a specific, calculable date and hardly anyone has calculated it.
FAQ
When will my negatively geared property turn positively geared as rents rise?
When rent exceeds interest plus the other deductible costs. Rent growth and, on a principal-and-interest loan, falling interest both close the gap; an interest-only loan removes the second and delays the crossover.
Is a property turning positive a good thing?
It is the point of holding it. It also converts a deduction into taxable income, which is worth checking against your retirement date because the marginal rate on both sides changes when you stop work.
How is rental income assessed for the Age Pension?
Net rent is assessed as actual income under the income test, and the property is an assessable asset at market value under the assets test. That combination is harsh for a low-yield property.
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
- ASIC Moneysmart — Property investment · ASIC Moneysmart · 2026Investment property: the costs of holding one and the risks of gearing.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.