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Edited version of private ruling
Authorisation Number: 1011733809732
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Ruling
Subject: Capital losses
Question:
Can carried forward losses be used to offset taxable income in subsequent years?
Answer: Yes.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
You and your spouse have held rental properties for a number of years.
The properties have made losses for a number of years.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 36-15
Reasons for decision
Rental losses carried forward
A rental loss incurred in one year may be carried forward and offset against rental gains in the succeeding income years. The losses may be carried forward indefinitely until absorbed.
To derive a tax loss, your allowable deductions (for example, rental property deductions) must exceed the total of both your assessable income (for example, rental property income) and your net exempt income.
Losses, which are carried forward from previous years, must first be offset against net exempt income and then against any assessable income remaining after all current year deductions are allowed (section 36-15 of the Income Tax Assessment Act 1997 (ITAA 1997)).
Your losses carried forward from previous years may be offset in future income years subject to the above conditions.
You are required to report rental losses in your tax return in the year in which they occurred.
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