🔗 Shared scenario loaded. Someone shared this scenario with you — all inputs have been pre-filled. Results are calculating automatically.
≈
Australian Property vs Shares
Configure your scenario on the left and click Run Comparison. Both paths start with identical capital. Annual cashflows are equalised year by year so the comparison is genuinely apples-to-apples.
📚 Learn & Reference

⚖️ The Core Principle — Apples-to-Apples Comparison

Both investors start with identical total capital (down payment + stamp duty + other costs + any offset balance). Each year, the calculator forces both investors to have the same personal cash position — if property is negatively geared and needs $10K top-up, the shares investor also invests an extra $10K. If property throws off $5K net, the shares investor sells $5K of shares. PPOR fix: in Live-in (PPOR) mode, the shares investor must still live somewhere, so we also model rent for an equivalent home (same price & rental yield assumptions, grown by your rent growth rate). The shares buy/sell each year is therefore based on (-Net Prop CF) − Rent, not just -Net Prop CF. This means the only difference between the two paths is what you walk away with at exit.

🏡 PPOR vs Investment Mode

Investment mode: Rental income flows in, CGT is calculated at exit, land tax applies annually. For the individual structure, CGT reflects the reform effective 1 July 2027: the 50% discount applies to the part of the gain accruing before 1 July 2027, and to the whole gain by election for eligible new residential dwellings; for the part accruing from that date the gain is instead indexed for CPI (using the rate set in Inflation / CPI (for CGT indexation), Investor Profile) and the real gain is taxed at your marginal rate or a 30% minimum, whichever is higher. SMSF and Company structures are unaffected by this reform and keep their existing treatment (see Limitations). New builds retain traditional negative gearing — rental losses offset other income immediately. Existing/established properties follow the 2026 reform: rental losses are quarantined and can only offset future rental profits (or reduce CGT on sale). Select "New Build" or "Existing" under Property Status to model the correct rule.

PPOR (Live-in) mode: You live in the property — no rental income, no land tax, and importantly no CGT on sale under the main residence exemption (Section 118-110 ITAA 1997). This makes property even more tax-advantaged vs shares, which always face CGT.

♻️ Debt Recycling — Is It Fair to Both Sides?

The offset account is property-specific: it reduces your interest-bearing loan balance using parked cash, lowering interest costs without selling the property. This is modelled symmetrically — the shares investor deploys the same offset balance in shares from day 0.

The debt recycling feature (property path only) converts non-deductible home loan principal into deductible investment debt — essentially using principal repayments to buy shares, making the interest tax-deductible. This is a property-specific strategy with no equivalent on the pure shares side.

The margin loan (shares path) is the shares investor's leverage tool. It directly amplifies returns (and risks). This is the shares-side equivalent of using a mortgage to buy property — available in the Shares section. Set Margin LVR > 0% to enable it.

Bottom line: Debt recycling gives the property side an additional tax advantage. If you want the comparison to be truly neutral, leave debt recycling off. If you want to model the full property strategy, enable it.

📊 Which Metric to Focus On

IRR is the primary metric. Δ FV tells you who ends ahead in dollars. Δ PV discounts that difference to today at 5%.

🔢 Methodology — Step by Step

  1. Starting capital: Down payment + stamp duty + other upfront costs + initial offset balance.
  2. Property appreciation: propValue_yr = propValue_0 × (1 + appreciationRate)^yr
  3. Rent growth: grossRent_yr = baseRent × (1 + rentGrowthRate)^yr
  4. Mortgage: P&I amortisation (IO supported). Offset reduces interest-bearing principal.
  5. Depreciation: Div 43 + optional Div 40 where eligible.
  6. Tax: Refunds/owings are converted to cashflow impacts.
  7. Cashflow equalisation: Shares buy/sell each year mirrors property net cash position.
  8. Shares: FIFO ledger for CGT, dividends + franking, ETF MER.
  9. Exit: Property CGT (or PPOR exemption) and shares CGT are calculated.
  10. IRR: Computed on full cashflow series including terminal proceeds.

📝 Base Case: Investor Individual, Sydney House

Purchase price$900,000
Loan$720,000 (80% LVR)
Interest rate6.2% pa
Stamp duty (NSW investor)~$35,000
Total starting capital~$220,000
Rental yield4.5% (~$40,500/yr gross)
Rent growth3.0% pa
Capital growth6.5% pa
Marginal rate37%
Investment horizon20 years
Shares CAGR8%, Yield 4%, Franking 70%

At these settings, rent growth (4.5%) is below capital growth (6.5%), so gross yield compresses from 4.0% at purchase down to about 2.6% by year 20 — this models the Sydney experience of the 2010s. (Those are this calculator’s shipped defaults; the engine reports a year-20 gross rent of $83,083 against a property value of $3,171,281. Change the rates and the compression changes with them.) The property is negatively geared early on. If modelled as a New Build, losses generate tax refunds that boost the property path's after-tax return. If modelled as Existing/Established (2026 rules), those early losses are quarantined — no immediate refund — which meaningfully reduces the property path's cashflow advantage in the early years.

🏡 PPOR Scenario Comparison

Switch Purpose to Live-in / PPOR with the same inputs: no rental income means no negative gearing consideration at all, but zero CGT at exit saves a substantial amount. For a $900K property growing at 6.5% over 20 years to ~$3.17M, with a ~$2.27M capital gain, CGT savings for an individual can exceed $400K — this often makes PPOR competitive or superior to renting equivalent space and investing the difference in shares.

LMI
Lenders Mortgage Insurance — required when LVR > 80%. Protects the lender, paid by borrower. Capitalised into loan.
LVR
Loan-to-Value Ratio — loan amount ÷ property value. 80% LVR means 20% deposit.
Negative Gearing
When property costs (interest + expenses) exceed rental income, creating a tax loss that reduces your taxable income.
Positive Gearing
Rental income exceeds all costs — the property generates positive taxable income.
CGT
Capital Gains Tax — tax on the gain from selling an asset. Since the reform effective 1 July 2027, individuals no longer receive the old 50% discount: the gain is indexed for CPI (using the rate set in Inflation / CPI (for CGT indexation), Investor Profile) and the real gain is taxed at your marginal rate or a 30% minimum, whichever is higher. SMSF and Company structures are unaffected — see the Limitations tab for their unchanged treatment.
PPOR / Main Residence Exemption
Your principal place of residence is exempt from CGT under Section 118-110 ITAA 1997. The full exemption applies if you lived there the entire ownership period.
FIFO
First In, First Out — the tax accounting method used here for shares CGT. The oldest lots are sold first. For the individual structure, each lot's gain is indexed for CPI and taxed at your marginal rate or a 30% minimum (whichever is higher) under the reform effective 1 July 2027 — not the old 50% discount.
IRR
Internal Rate of Return — the discount rate that makes the NPV of all cash flows (including terminal proceeds) equal to zero. The primary performance metric here.
Δ FV (Delta Future Value)
Property net proceeds minus shares net proceeds at exit. Positive = property wins.
Δ PV (Delta Present Value)
ΔFV discounted to today at 5% pa. Shows the present-day value of the terminal advantage.
Break-even Year
The last year at which shares equity permanently crosses (and remains above) property equity — scanned right-to-left to find the sustained crossover.
Cashflow Equalisation
Annual cash flows are forced to be identical in both paths. Only the terminal proceeds differ. Makes the comparison genuinely apples-to-apples.
Offset Account
A bank account linked to your mortgage. The balance reduces the interest-bearing loan principal. $50K in offset on a $720K loan = you only pay interest on $670K.
Margin Loan
Borrowing to invest in shares, using the share portfolio as collateral. Amplifies both gains and losses. Interest is tax-deductible.
Division 40
Depreciation on plant & equipment (carpets, appliances, A/C etc). Diminishing value method at 2× straight-line rate. Only for properties with physical assets.
Division 43
Capital works deduction — 2.5% pa of the construction cost of buildings and structural improvements, for up to 40 years from construction date.
Yield Compression
When rental yield (rent/price) falls over time because prices grow faster than rents. Common in capital cities during bull markets.
Franking Credits
Tax credits attached to Australian company dividends, representing tax already paid at the corporate rate (30%). Can offset your personal tax liability, or generate a cash refund if credits exceed tax owed.

⚠️ Assumptions & Limitations

  • Constant growth rates: Capital growth and rent growth are fixed annual rates. Real returns are lumpy, cyclical, and path-dependent — use Monte Carlo to stress-test.
  • No vacancy events in base case: Vacancy/repair events are stochastic in Monte Carlo only. The base case assumes 100% occupancy at the specified occupancy rate.
  • Post-2027 individual CGT reform: For the individual structure, the 50% discount is replaced by CPI cost-base indexation for gains accruing from 1 July 2027 (it still applies to CGT events before that date). CGT is calculated on the CPI-indexed real gain — indexed using the rate set in Inflation / CPI (for CGT indexation), Investor Profile — taxed at your marginal rate or a 30% minimum, whichever is higher. Complying super funds (SMSF, both accumulation and pension phase) and companies are unaffected by this reform and correctly retain their existing treatment: SMSF accumulation is taxed at 15% on two-thirds of the gain (10% effective), SMSF pension phase is 0%, and companies are taxed at 30% with no discount. If your SMSF or Company number didn't change after this update, that's expected, not a bug.
  • CGT indexation is a CPI proxy: Indexation uses your assumed Inflation / CPI rate, not actual ATO-published quarterly CPI figures — treat CGT results as an estimate. The reform also exempts income-support (including Age Pension) recipients from the 30% floor in their disposal year, taxing them at indexed marginal rates instead; this exemption is not modelled in this version, so a disposal in a pensioner year may be over-taxed by the calculator. Legal status: this is enacted law — Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Act No. 49 of 2026) and Income Tax Rates Amendment (Tax Reform No. 1) Act 2026 (Act No. 50), both Royal Assent 26 June 2026 — not a proposal or a Budget announcement. What survives: the 50% discount still applies to CGT events before 1 July 2027, remains available by election for eligible new residential dwellings, and the affordable housing discount of up to 60% is retained in full. Indexation basis: Tepuy compounds CPI annually; real indexation uses the ATO’s published quarterly CPI index numbers, so treat the indexed figure as indicative. Transition method: the gain is time-apportioned by holding period either side of 1 July 2027. The Subdivision 112-E deemed-disposal mechanism is deliberately not modelled — it needs a market value at 1 July 2027 that this calculator cannot ask you for. A market-valuation alternative may be available to you, and ATO apportionment guidance is still pending.
  • Stamp duty approximations: Brackets were last verified against the published state revenue office schedules on 30 August 2026, for all eight states and territories (ACT and NT duty are formula estimates). Concession eligibility rules are simplified. Always verify with your state's revenue office or a conveyancer.
  • PPOR simplification: Full exemption assumed — partial exemptions (e.g. renting out rooms, or not living there the full period) are not modelled.
  • Interest-only loans: Modelled as IO payments for the specified period, then P&I on the remaining balance. Refinancing costs and rate changes at IO end are not included.
  • Loan amortization is an annual approximation: Interest is calculated once per year on the start-of-year balance, not compounded monthly. This slightly under-pays principal relative to true monthly amortization, leaving a small residual balance (typically ~5% of the original loan) still outstanding at the exact end of your stated loan term — it clears itself within about a year once amortization continues past that point. If your investment horizon lands exactly on your loan term, expect the displayed loan balance at exit to be a few percent above zero rather than exactly $0.
  • No land tax threshold sharing: Land tax is calculated on the investment property's land value only. Aggregated land tax across multiple properties is not modelled.
  • No body corporate or strata fees: For apartments, body corporate levies can be material (often $3,000–$10,000/yr). Include these in your "owning costs" input.
  • Inflation not explicit: All figures are nominal (not inflation-adjusted). A 6.5% capital growth rate in a 3% inflation environment implies ~3.5% real growth.
  • Tax simplification: Individual structure uses a flat marginal rate throughout. Medicare levy and other surcharges are not included. SMSF uses flat 15%. Company uses 30%.
  • Shares as a pooled asset: The shares portfolio is modelled as a single asset. In reality, a diversified portfolio has sector-specific risks not captured by a single volatility parameter.
  • Franking credit refunds: Modelled accurately for individuals and SMSFs. Refunds are not available for companies (imputation credits offset corporate tax only).

❓ Frequently Asked Questions

Why is stamp duty so high — is this correct?

Stamp duty is automatically calculated based on the state, purchase price, and whether you're a first home buyer. For example, a $900K property in NSW as an investor attracts ~$35,000 in stamp duty. As an FHB buying an existing home under $800K in NSW, stamp duty is waived entirely. The brackets were last verified against the published state revenue office schedules on 30 August 2026. If you've negotiated a different amount, you can override the auto-calculated value directly.

What exactly changes in PPOR mode?

Three things: (1) Rental income is set to zero — you're living there, not renting it out. (2) CGT is zero at exit — the main residence exemption (s118-110 ITAA 1997) means no tax on the capital gain. (3) Land tax is zero — your primary residence is exempt in all Australian states. This makes the property path significantly more tax-advantaged, and often makes PPOR the winner even against historically strong share returns.

Why can rent growth differ from capital growth?

In practice, rents and prices don't move in lockstep. During periods of strong price growth (e.g. Sydney 2012–2017), rents grew much slower than prices, compressing the gross yield. At this calculator’s defaults (4.0% starting yield, 4.5% rent growth, 6.5% capital growth) the engine compresses the gross yield from 4.0% at purchase to about 2.6% by year 20. This model captures that by using separate rates. If you set them equal, the gross yield stays flat (traditional model). Realistic modelling usually has rent growth slightly below capital growth over long periods.

How does the 2026 negative gearing reform work in the model?

From 2026, the Australian Government removed negative gearing for existing (established) properties. If your taxable rental income (rent − expenses − interest − depreciation) is negative, that loss can no longer offset your salary or other income. Instead it is quarantined in a carry-forward pool. The pool reduces tax in future years when the property turns profitable (positive rental income), and any unabsorbed balance at sale can reduce the capital gain. New builds (newly constructed, never previously occupied) retain traditional negative gearing — losses still offset other income in the year they occur. Select "New Build" or "Existing" under Property Status to model the correct treatment. Note: depreciation (Div 40 + Div 43) still reduces taxable rental income under both regimes; for existing properties it simply builds up the carry-forward pool rather than generating an immediate refund.

Why does property often win early but shares catch up later?

Property benefits from leverage — a $720K loan amplifies returns on your $220K capital. But leverage cuts both ways, and interest is a real cost. Over time, as the loan is paid down, the leverage benefit diminishes. Shares, growing unencumbered from day 1 (or with a margin loan), often compound faster in absolute dollar terms once property's loan drag catches up.

Is the comparison fair with the offset account?

Yes. The offset balance is added to both investors' starting capital — the shares investor deploys it in shares from day 0. Annual offset contributions are matched by additional share purchases. The offset reduces the property investor's interest, but the shares investor also benefits from having that capital compounding in shares. Both mechanisms are captured symmetrically.

What is the Break-even Year?

The last year that shares equity permanently overtook property equity. The calculator scans right-to-left to find the most recent sustained crossover — not a temporary early dip. If shares equity is always below property equity throughout the period, break-even is "None." If they cross multiple times, you see the last (most permanent) one.

What's the difference between IRR and CAGR?

CAGR (Compound Annual Growth Rate) measures asset price growth only. IRR (Internal Rate of Return) measures the actual return on your invested capital, accounting for all cash flows — the initial outlay, annual negative/positive gearing cash flows, and the final exit proceeds. IRR is the more meaningful metric because it captures the full economic picture, including leverage and tax effects.

How does franking credit refund work?

Australian companies pay 30% corporate tax before paying dividends. Shareholders get franking credits for this prepaid tax. If your personal tax rate is lower than 30% (or you're in pension phase), the ATO refunds the surplus. E.g. if you receive $4,286 in franking credits but only owe $2,500 in tax on the grossed-up dividend, you get a $1,786 cash refund. This calculator models this correctly for individuals and SMSFs.

Why do different property types change the result?

Property type auto-fills three key parameters: building component % (affects depreciation deductions), appreciation rate (houses historically outperform apartments over long horizons), and rental yield (apartments have higher yields but lower growth). You can override any of these after selecting a type.

Does LMI affect the comparison?

Yes — LMI is capitalised into the loan, increasing the loan balance (and therefore interest costs). It does not add to the shares investor's starting capital (since it's financed, not a cash cost). This creates a small disadvantage for the property path when LVR > 80%, accurately reflecting the true cost of higher leverage. Use the LMI Calculator to see your exact premium before running this comparison.