Ring-fencing of rental losses

Written by Gordon

March 11, 2019

Tax

Residential Rental Properties: Tax Changes The Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill was introduced into parliament late last year and is currently in the select committee stage.  
 
The Bill introduces the ring-fencing of losses on residential rental properties from the start of the 2019-20 income year, i.e., from 1 April 2019 for 31 March balance dates. What this means is these tax losses will no longer be able to be set off against other income and the key features are:
 
(1) The rules are proposed to apply to “residential land” which does not include farmland, main home, mixed-use property, property that will be taxed on sale, property owned by widely-held companies, (certain) employee accommodation.
 
(2) The rules will apply on a portfolio basis, that is, taxpayers would be able to offset deductions for one residential property against income from other properties
 

What this means is these tax losses will no longer be able to be set off against other income

(3) Ring-fenced residential property deductions will be able to be offset against future residential rental income and taxable income on the sale of residential land. Any remaining unused deductions will generally continue to be ring-fenced
 
(4) A rule is proposed to prevent interposed entities being used to circumvent the deduction ring-fencing rules
 
What this practically means is that any losses resulting from residential rental activity will not be able to be used to offset against other income, and for some people this will mean that they will no longer receive tax refunds.

Related Articles

How to Use Marketing Effectively to Grow Your Sales

Increasing sales is not only just an important marketing objective, but also an essential means of maintaining business viability, and potentially expanding your growth. There are many efficient and sometimes inexpensive ways of using marketing to drive your sales. In...

Ways To Boost Your Mental Wellbeing at Work

The resurgence of COVID-19 and the strain it has caused on the economy can seem intimidating to a lot of small business owners who are currently struggling to stay afloat. If you’re a business owner or  manager, there’s a lot you can do individually to support your...

A Summary of all the Tax Changes and Support Schemes for COVID-19

The year 2020 and the world’s current economic status has taken a battering with the outbreak of COVID-19. With governments racing to create relief and incentive schemes for local businesses, the purpose of this article is to simply outline all the key tax changes and...

Stay Up to Date With The Latest News & Updates

Join Our Newsletter

Stay up to date with all of the latest news and insights related to your business. Sign up below and we promise to only send you content