Article
How To Model Negative Gearing On Multiple Off‑the‑Plan Apartments
Written and reviewed by James Chee, CPA · Last reviewed
A practical Australian guide to modelling tax deductions and negative gearing when buying two or more off‑the‑plan apartments, using numbers you can test this week.
Key Takeaway
This article explains how Australian investors can model tax deductions and negative gearing on two or more off‑the‑plan apartments under current rules and the proposed 1 July 2027 reforms, which will quarantine many rental losses to rental and capital gains income. It sets out a step‑by‑step spreadsheet method, an example for two $750k units with 80% LVR, and shows why investors must ensure properties make sense on pre‑tax cashflow before relying on future tax refunds. Actionable insight: run base and worst‑case scenarios this week before signing any new contracts.
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Australian expats investing back home
If you are modelling negative gearing on off‑the‑plan apartments from overseas, this video shows how lenders treat your foreign income.
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Australian expats trying to invest back home face an incredibly frustrating barrier. Major banks use massive currency shading models that slash your real foreign income by up to 30% on paper, making you look like you can't afford a loan. We use cross-border specialist lenders who evaluate your actual global earnings without the penalising retail haircuts. Keep building your Australian portfolio. DM me 'EXPAT' to check your true capacity.
General information only, not personal advice. Your situation is assessed before any recommendation.
This topic is covered in full on Tailored Loans Sydney
A practical Australian guide to modelling tax deductions and negative gearing when buying two or more off‑the‑plan apartments, using numbers you can test this week.
Read the full guide on tailoredloans.sydneyModelling negative gearing on two or more off‑the‑plan apartments means building a simple year‑by‑year cashflow model that separates rent, expenses, interest, depreciation and tax outcomes for each property, then combining them to see if your portfolio works on pre‑tax numbers. With negative gearing reforms from 1 July 2027 likely to quarantine many losses to rental and capital gains income, you must stress‑test deals assuming no refundable tax benefit as well as today’s rules.
Quick answer for busy readers:
- Model each property separately (rent, expenses, interest, depreciation).
- Add your marginal tax rate and run two cases: current rules vs 2027+ quarantining.
- Check you can handle repayments and all costs without any tax refund, using at least a 3% interest rate buffer and realistic vacancy.
Model each off-the-plan property separately before combining portfolio numbers.
1. Key rules: how negative gearing and off‑the‑plan tax deductions work
1.1 Negative gearing in plain English
Negative gearing happens when your deductible rental costs (interest, eligible expenses, depreciation) are greater than your rental income.
Today, that loss can usually be offset against your salary and other income, reducing your tax bill and partially funding the shortfall.
From 1 July 2027, Federal Budget measures and the draft Tax Reform No. 1 Bill 2026 propose that for many new residential investments:
- Rental losses will be quarantined to rental and capital gains income (no more offset against wages).
- The 50% CGT discount is replaced by indexation plus a minimum 30% tax on gains for individuals and trusts.
- Many existing properties will be grandfathered under old rules; new ones won’t.
These settings make it dangerous to buy anything that only works because of a big negative gearing refund. You need to think the way we argued in [/insights/adjusting-investment-property-selection-when-tax-rules-tighten]: focus on pre‑tax performance first.
1.2 Off‑the‑plan specifics
For off‑the‑plan units or townhouses:
- Interest is not deductible until the property is available for rent (ATO). Pre‑settlement interest on land or progress draws can sometimes be deductible, but you get no rent yet, so the loss is pure cashflow pain.
- Depreciation (Division 43 building write‑off and Division 40 plant) only starts once the property is completed and producing income.
- A new build usually gets higher depreciation than an older unit, which helps deductions but doesn’t change your bank repayments.
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