Private ruling: Rental property losses
Published: September 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Questions and answers | Are you required to include the rental property losses in the Trust's income tax return in the years the losses were incurred? | Yes. | Are you required to include the capital loss in the Trust's income tax return in the year the loss was made? | Yes.

Relevant facts and circumstances: You are the trustee of the Trust, which is not a resident of Australia for tax purposes. The trust owned a rental property in Australia as trustee for the trust. The rental property was purchased several years ago and sold in the year ended 30 June 2012. The rental property made losses during the years it was owned. A capital loss was made when the property was sold in the year ended 30 June 2012.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5. | Income Tax Assessment Act 1997 Section 855-15.

Reasons for decision: Detailed Reasoning - Rental property losses: The assessable income of a foreign resident includes: · the ordinary income you derived directly or indirectly from all Australian sources during the income year; and · other ordinary income that a provision includes in your assessable income for the income year on some basis other than having an Australian source. In your case, you are the trustee of a trust that owns an Australian rental property. Therefore, any income or loss made from that property must be declared in the trust's Australian income tax returns, in the year that the income was derived (or the loss was incurred). For example, for losses incurred in the year ended 30 June 2003 must be included in that year's income tax return. | Detailed Reasoning - Capital gains tax: A foreign resident makes capital gains (or losses) only on the disposal of taxable Australian property. Assets that are taxable Australian property include a direct interest in real property situated in Australia (for example a house located in Australia). In your case, you are the trustee of a foreign trust and you made a capital loss on the disposal of a rental property located in Australia. Therefore, you are required to include this capital gain in the trust's income tax return, in the year that the loss was made.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.