Hi Guys, I have a few investment properties were they are negatively geared (losing about 25k/yr which also includes depreciation). My income does not cover the loss but I am in a position to still cover the losses. So say at after 3 years when I sell one of the properties and make a capital gain, can I claim the loss of the last 3 years (being 25k/yr)?
If you make $20k and have a loss of $25k then overall your income is negative $5k It is just this $5k that carries over and can reduce future taxable income.
So would the 5k loss year on year keeps carrying over? Is their a rule as to how many years it can roll over? Say for example if I keep making a lose of 5k/yr for the next 3 years and then sell an IP and make 100k, can I reduce my taxable income by 15k?
No limit Yes you would have negative $15k which would then reduce your taxable income which would reduce your CGT. This tip may help you Tax Tip 204: Better to claim an expense off income rather than CGT? Tax Tip 204: Better to claim an expense off income rather than CGT?
A carried forward income loss (if it is available) will be applied against the Discounted CGT gain if there is one OR against assessable income in a future year even if that year lands under the tax free threshold. This application of the loss is completed by the taxpayer at field L1 in the return. Its not automatic. Using carried forward income tax losses is generally TWICE as efficient as deferring deductions as a third element cost as Terry incicates in Tip 204 because of the 50% CGT discount. I would generally suggest the creating of income losses is more beneficial and more flexible. A example is if salary was to increase. That extra income could enjoy a tax free holiday when the losses are applied rather than waiting until the CGT event. A taxpayer cant choose when to use losses as they must be applied as early as possible even if assessable income sits under the tax free thshold.
Yes - This is often missed. I had one who was expat and accumulated a loads of revenue losses in 18 years. Came home and used it for CGT and the ATO asked questions. They carefully looked at two random years for the rental and found no issues and didnt bother to look at all years. That was a loss his former agent said he couldnt claim as he was non-resident (wrong) And the CGT gain they said it couldnt get a 50% discount but it just needed a 8th May 2012 valuation. The investment in the val saved almost $150K. ATO looked at the valuation and just ticked it off.
