Private ruling: Foreign rental loss
Published: July 2013
Ruling period: 1 July 2013 to 30 June 2017.
Date scheme commenced: 1 July 2013.

Ruling: Question and answer: | Are you entitled to include losses from a foreign rental property in your Australian income tax return? | Yes.

Relevant facts and circumstances: Along with your partner, you intend to purchase a property in another country (the property). You intend to rent the property out and will make a rental loss on the property.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Detailed Reasoning - Rental losses from a foreign property: When a taxpayer earns rental income from a property, they are entitled to a variety of deductions for losses and outgoings associated with the earning of that income. These deductions are provided for by various sections of the tax law. When deductions for allowable losses and outgoings in respect of a rental property exceed the income earned from that property, a net rental loss is made. When the property concerned is a foreign rental property, the net income or loss from that property is declared against Item 20 (Foreign source income and foreign assets or property) in the supplementary section of the relevant income tax return (generally against Label R - Net Foreign Rent - although the labels may change from year to year) and is used to determine the total of the taxpayer's supplementary income for the year, which in turn is used to determine the taxpayer's total assessable income for the year. Declaring a net loss from foreign rental property against item 20 in the supplementary income tax return has the effect of reducing a taxpayer's assessable income for the year in question. | Detailed Reasoning - Application to your circumstances: You will make a net loss from a foreign rental property. You are entitled to include your share of that loss in your Australian income tax return under Item 20 of the supplementary section of your income tax return.