Private ruling: Rental property loss
Date of advice: 2 August 2017
Published: November 2017
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Can the losses you have incurred from your Australian rental properties be quarantined and offset against Australian tax in future years even though you still have a positive taxable income? | A1: No

Relevant facts and circumstances: You are an Australian resident for taxation purposes. You earn foreign employment income. You have rental properties that are in Australia which earn income but are all negatively geared. The losses on your current properties have no tax benefit to you as the rate of tax you are paying overseas is higher than Australian tax rates.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 4-15 | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 6-10 | Income Tax Assessment Act 1997 section 36-15

Reasons for decision: Summary: An Australian resident taxpayer, whether an individual or a company, is assessable on ordinary and statutory income derived from all sources during the income year, whether in or out of Australia (sections 6-5 and 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)). This means that a resident individual or company should include their worldwide income earned during the income year in their Australian income tax return. You can deduct your losses or outgoings for an income year to the extent they are related to your assessable income earned during that same year (section 8-1 of the ITAA 1997). If your assessable income for a particular income year is more than your allowable deductions, including any losses whether from current or prior years, you are taken to have a taxable income equal to the excess (section 4-15 of the ITAA 1997). You have assessable income derived from outside Australia in addition to assessable income from your Australian rental properties. You have incurred expenses associated with your rental properties that exceed the income generated from them during the income year. This has resulted in you incurring a loss in relation to your rental properties during the income year. The loss does not exceed your total assessable income for the income year. As an Australian resident you must declare all your income and claim all the associated deductions in the year in which they are derived and incurred. Your rental property loss does not exceed your total assessable income and therefore cannot be carried forward to later income years.