cheap lenses australia

Ring-fencing residential rental property losses

The inability to offset residential rental losses against salary and wages (and other income) is one step closer to reality after the Government released an issues paper today. In a nutshell –

• Losses arising from rental properties will not be able to be offset against the taxpayer’s other income. These losses often arise due to interest payable on mortgages on the rental property.

• The ring-fencing will apply to residential properties only (including overseas residential rental properties)

• The person’s main home will be excluded from ring-fencing, as well as properties that are held on revenue account (i.e. subject to tax on sale because of a land dealing, development or subdivision business) and properties that are subject to the mixed-use asset rules

• The ring-fenced losses can be carried forward to future years and offset against future rental income or against future taxable income on the sale of the property

• Losses will be able to be offset on a portfolio basis i.e. ring-fenced losses from one property can be offset against income from another rental property

• The rules will apply to individuals as well as trusts, companies (including LTCs), and partnerships

• The rules are intended to kick in from the start of the 2019/20 income year.

The Issues Paper can be found on Inland Revenue’s tax policy website:

Submissions close on 11 May 2018.

One Response

Peter on April 29, 2018 at 4:29 pm

When you have more than one job all your income is added up and you pay tax on the total income amount.

For instance, your primary job pays $60,000 per year and your secondary pays $10,000 per year so you pay income tax on the $70k – just the same tax as if you had one job at the $70k.

Similarly, if your secondary income is a part-time business that returns you a net $10,000 per year the same rules apply.

So if your part time business, in that particular year, shows a net loss of $10k then you can deduct that loss and pay tax on your total income of $50k.

It matters not if your part-time business is retailing fidget spinners through TradeMe, boarding cats, catering at the bowling club, or renting out a residential house to tenants – under tax law exactly the same rules apply in each and every case.

So this is not some special tax lurk that only applies to landlords. It applies to each and every taxpayer.

Those who want those rental losses ring-fenced are actually asking for a special tax law that would only apply to landlords and to nobody else.

Why penalise landlords – and only landlords – in this way?

Write a Comment

Take a moment to comment and tell us what you think. Some basic HTML is allowed for formatting.


Recent comments

  • Peter: When you have more than one job all your income is added up and you pay tax on the total income amount. For...
  • Joanne Martin: Hi Would you be able to email me to discuss a small company that is an LTC which I need some advice on...
  • Rizwana Saheed: You are on the right track that there is an exemption when employees work overtime but whether or not...
  • bryan: as a group of employees we get paid meal money if we exceed 11hrs on any day. Employer says he wants to tax...
  • linda: My mother is 94 and has dementia. With govt assisted carers she is still living in a home gifted within the...
  • Sharon: Hi Daniel, Can you please advise how owners of a profit-making LTC pay themselves? The owners used to pay...
  • Another Anne: My Dad is in care on full subsidy. I am EPOA. Are we able to gift some money to my brother in UK so...
  • Twagilayesu Isaya: I agree with the author of this article that Inland Revenue Department need to provide clear...
  • Quinn: Hi. I would like some clarification regarding the valuation of the investments component of the owners basis...
  • QROPS Pensions: Interesting piece of writing, you always write the most useful content & TalkTax is no exception...

Upcoming Events

  • No events.


In the past 12 months, do you think the amount of IRD investigations being undertaken has?

View Results

Loading ... Loading ...


    For the moment, we have no authors