I have a rental property that I have never lived in and is owned jointly with my wife in a 50/50 share. My wife stopped working since we had our first child and since then has had no income to write off the loss she makes every year on the property. We are talking approx. 6 years of losses! If we move back into the house, do some major renno's then sell the house while she is still not working can all her losses be accumulated in toto and be written off against the capital gain in conjunction with the money used to renovate IOT effectively reduce the amount of tax that has to be paid on sale of the property or are the losses only valid to be written off when she goes back to work. I have spoken to two accountants and been given two different stories. BS
Tax losses from negatively geared rental properties can be offset against capital profits from the sale of a rental property. Prior year tax losses from negatively geared rental properties will be carried forward until income is generated to recoupe them (or death). The costs of a renovation can be used to determine the cost base of your property when calculating the capital gain. So yes, yes and yes. A few more issues when calculating the tax payable but I think that is the kernal of the answer you are looking for.
One benefit of the carried forward losses is how CGT discounts work. It works in her favour this time. eg Lets say $30K of C/Fwd tax losses. Well if the CGT profit is say $100K then its shared 50:50. But each taxpayers is assessed on 50%. So her assessable amount is $25K. The $25k CGT profit exceeds the $30K losses so $5k remains in c/fwd losses. Taxpayers cannot limit their use of losses so their taxable income remains at $18,200 however. They must use losses to the extent of taxable income. I do question if the renovation is being done on capital or revenue account. That may need to be explored. Even a single isolated profit making issue can be revenue account and taint the CGT basis. It doesnt seem the case but needs to be considered
