Negative Gearing Perth 2026 | Still Worth It at 4.10%?

Negative Gearing Perth 2026: Is It Still Worth It With the RBA at 4.10%?

The question every Perth property investor is asking in 2026 is whether negative gearing Perth 2026 still makes financial sense at the RBA cash rate of 4.10% and investment loan rates of approximately 6.2%–6.4%. The honest answer is: it depends on your marginal tax rate, your property selection, and your investment horizon. But the maths have changed since the 2021 low-rate era — and understanding exactly how they have changed is essential before making any Perth investment decision in 2026.

Negative gearing remains legal, unchanged, and widely used by Australian property investors in 2026. The ATO confirmed no changes to the rules. The political debate about potential CGT discount changes (proposed in the May 2026 budget) is ongoing but not yet legislated. This guide gives you the real after-tax numbers, the Perth capital growth context, and a clear framework for assessing whether negative gearing Perth 2026 works for your specific situation.

What Is Negative Gearing and How Does It Work in Perth?

Negative gearing Perth 2026 occurs when the total costs of holding an investment property- loan interest, property management fees, council rates, insurance, repairs, and depreciation – exceed the rental income the property generates. The resulting annual loss is deductible against your other taxable income, reducing the income tax you owe.

Example: A $700,000 Perth investment property financed at 80% LVR has a $560,000 loan at 6.3% investment rate. Annual interest: $35,280. Add property management (8% of $36,400 annual rent): $2,912. Council rates, insurance, maintenance: $4,500. Depreciation schedule: $4,200. Total annual costs: $46,892. Annual rental income ($700/week): $36,400. Pre-tax shortfall: $10,492 per year.

At a 37% marginal tax rate (including Medicare), the ATO returns $3,882 in tax savings. The real after-tax out-of-pocket cost is therefore $6,610 per year – or approximately $550 per month. The question for the investor is whether Perth’s capital growth will comfortably exceed this cost over their holding period.

Negative Gearing Property Australia 2026: The Capital Growth Equation

The fundamental logic of negative gearing property Australia 2026 is that you accept a short-term cash flow sacrifice in exchange for long-term capital gain. The strategy succeeds when capital growth outpaces your after-tax holding cost. It fails when growth stagnates and losses compound. In Perth in 2026, the capital growth side of the equation is historically strong:

Perth annual house price growth: 7.4% year-on-year to March 2026 (CoreLogic). On a $700,000 property, 7.4% growth is $51,800 in value gain - approximately $45,190 after CGT discount (50% at current rules, on a property held over 12 months) - against an after-tax cash shortfall of $6,610. The ratio is 6.8 to 1 in favour of the investment.
Perth 22% annual growth (broader Cotality measure): At the higher Cotality figure of 22% annual growth (to February 2026), the capital gain is $154,000 in year one alone - making the $6,610 after-tax cash shortfall essentially irrelevant in the short term. Even at half this rate in coming years, negative gearing in Perth's current market is a mathematically defensible strategy for the right income bracket.
The break-even test: A negatively geared property 'works' when the annual capital growth exceeds the after-tax holding cost. At Perth's 7.4% growth rate and our $700,000 example, break-even requires only 0.94% annual growth - so the current growth rate provides approximately 8× the buffer required.

At What Tax Bracket Does Negative Gearing Perth 2026 Make Sense?

Negative gearing Perth 2026 generates its maximum tax benefit at high marginal tax rates. Here is the after-tax cost comparison across tax brackets for the same $700,000 property with a $10,492 pre-tax shortfall:

Tax Bracket (incl. Medicare)	Tax Saving on $10,492 Loss	After-Tax Annual Cost	After-Tax Monthly Cost
21% (income $18,201–$45,000)	$2,203	$8,289/year	$691/month
34.5% (income $45,001–$120,000)	$3,620	$6,872/year	$573/month
39% (income $120,001–$180,000)	$4,092	$6,400/year	$533/month
47% (income $180,001+)	$4,931	$5,561/year	$463/month

The 47% bracket (including the 2% Medicare levy) reduces the real monthly out-of-pocket cost from $874 (pre-tax) to $463 – a saving of $411 per month from the ATO. For investors on lower income, negative gearing is less efficient – requiring higher capital growth to justify the holding cost.

Negative Gearing Perth 2026: The 2026 Policy Risk You Must Know

The one significant risk factor for negative gearing Perth 2026 in 2026 is the proposed CGT discount change. The federal government is reportedly considering reducing the CGT discount on assets held longer than 12 months from 50% to 33% as part of the May 2026 budget. This proposal has NOT been passed into legislation as of April 2026 – it is still at the discussion and consultation stage.

If legislated, the change would increase the CGT payable on a future investment property sale. On a $200,000 capital gain after 10 years, the current 50% discount results in tax on $100,000 (at 37% MTR = $37,000 in CGT). Under the proposed 33% discount, you would pay CGT on $134,000 (at 37% MTR = $49,580 in CGT) – an extra $12,580 in tax on the same gain. This does not kill the negative gearing strategy – Perth’s capital gains historically far exceed any realistic CGT increase – but it tightens the return margin and makes property selection more critical.

Negative Gearing vs Positive Gearing: Which Is Right for Perth Investors?

Negative gearing Perth 2026 works best for high-income earners in strong capital growth markets who can tolerate ongoing cash flow contributions. Positive gearing – where rental income exceeds all holding costs – provides monthly cash flow but typically at lower capital growth prospects. In Perth’s current market, genuinely positive gearing (before depreciation) is difficult to achieve at standard property prices and investment loan rates of 6.2%–6.4%, because yields would need to exceed 6.3% gross to turn a profit at 80% LVR. This is achievable in Perth’s high-yielding unit market (5.5%–6.5%) or in specific outer-corridor houses with strong tenant demand.

The middle ground – neutral or slightly negative gearing – is often the most practical strategy for Perth investors in 2026: minimising the cash contribution required while still accessing capital growth. We model both neutral and negative gearing scenarios for every investment client before recommending a strategy.

How Strawberry Finance Assesses Negative Gearing Perth 2026

Negative gearing Perth 2026 decisions should never be made based on generic rules of thumb. At Strawberry Finance, we calculate the actual after-tax holding cost for your specific income, your specific property choice, and your chosen loan structure – then compare it against realistic capital growth projections using current REIWA and Cotality data. If the numbers work, we structure the loan to maximise tax efficiency. If they do not, we tell you honestly.

Call 0457 133 453 or visit strawberryfinance.com.au to discuss whether a Perth investment property under the current rate environment makes sense for your tax bracket and financial goals.

Frequently Asked Questions

Is negative gearing still legal and available for all Perth investors in 2026?

Yes. Negative gearing remains fully legal and unchanged in Australia as of April 2026. The ATO allows the deduction of investment property losses against other income under Section 8-1 of the Income Tax Assessment Act 1997. No legislation has been passed to restrict negative gearing. The May 2026 budget may include a CGT discount proposal, but negative gearing itself is not under threat in any current political proposal.

What is the minimum rental yield needed to make Perth negative gearing viable?

There is no single ‘minimum yield’ because viability depends on your marginal tax rate, loan rate, and expected capital growth. As a practical guide for Perth in 2026: at a 6.3% investment loan rate and 80% LVR, a gross yield of 5.0%+ produces a manageable after-tax cash shortfall of $400–$600/month for investors at the 37% bracket. Yields below 3.5%–4.0% at current rates can generate shortfalls exceeding $1,000/month before depreciation, requiring strong capital growth to justify.

Can I negative gear a Perth property if I am self-employed?

Yes. Self-employed investors can negative gear just like PAYG employees. The rental property loss is deducted against your assessable business or personal income on your tax return. One important consideration: if your taxable income varies year to year due to business performance, the value of the negative gearing deduction also varies. In years of higher business income, the deduction is worth more. In lower-income years, it is worth less. We model this variability for self-employed clients before recommending the strategy.

Does the May 2026 CGT proposal affect existing investment properties?

As of April 2026, the CGT discount proposal is not legislated. If it is eventually passed, transitional arrangements would likely apply — potentially protecting existing properties or applying the change only to assets acquired after a certain date. This is the pattern from previous CGT reform proposals in Australia. We recommend that Perth investors who are concerned about the proposal’s impact on their long-term plans discuss their specific scenario with their accountant, rather than making property decisions based on an unlegislated proposal.

Is Perth or Sydney a better negative gearing market in 2026?

Perth offers significantly better negative gearing fundamentals in 2026. Perth’s entry prices are lower (Perth median ~$1M vs Sydney ~$1.5M), meaning the initial loan and interest burden is lower. Perth’s capital growth is higher (7.4% annual, CoreLogic March 2026, versus Sydney’s 4.2%). And Perth’s rental yields are higher (4.0%–5.5% versus Sydney’s 2.5%–3.5%), meaning the cash flow shortfall requiring after-tax subsidy is smaller. For interstate investors looking at where to buy a negatively geared investment property in 2026, Perth presents a compelling combination of yield, growth, and entry price.

How do depreciation schedules reduce the effective cost of negative gearing?

A depreciation schedule prepared by a quantity surveyor identifies the annual depreciation allowances on both the building (Division 43 – typically 2.5% of construction cost for post-1987 buildings) and the plant and equipment (Division 40 – carpets, appliances, hot water systems, etc.). On a typical Perth investment property, depreciation of $3,000–$8,000 per year further reduces taxable income beyond the cash costs of holding the property. This means the property can be cashflow-negative on a cash basis but show a larger tax loss on paper – increasing the tax refund without requiring additional cash outlays.

Do you want to know whether Negative Gearing Perth 2026 is right for Your Investment Strategy?

We’ll assess your income, tax position, and investment goals, explain how negative gearing works, and help you structure your property investment efficiently-so you can maximise long-term wealth and potential tax benefits in 2026. Strawberry Finance offers expert guidance with a free consultation..

Note: This article is intended to provide general information only. It does not take into account the financial situation, objectives, or needs of any individual reader and must not be relied upon as financial product or credit advice. While every effort has been made to ensure the accuracy of the information provided, some details may change over time or may not always reflect the most current market conditions. Readers should consider seeking independent financial or professional advice before making any financial decisions based on this information.

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