Ring-Fencing of Residential Rental Losses

On 5 December 2018 draft legislation was introduced by the government to ring-fence tax losses for residential rental properties.

The finer details for this new law are still being thrashed out, but broadly speaking, if you own residential rental property that makes tax losses, then from 1 April 2019 you will no longer be able to offset these against other income sources.  Instead the losses will carry forward and accumulate to be offset against future taxable profits earned from the property.

The impact of this change is mainly a timing difference and investors that are heavily negatively geared will be hit the hardest.  Tax losses from residential rental properties can still be used, they are just deferred until a profit is made.  Also, the law will work on a portfolio basis, meaning that profits from one property can be offset against losses from another, provided they are owned by the same individual(s) or a common structure.

If you own residential rental property and would like to discuss your options around this new law, get in touch.

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