Can you use losses on rental properties to offset other income?

Mike has two investment properties and wants to know what happens when they make a loss.

Can you use losses on rental properties to offset other income?

Mike has two investment properties and wants to know if losses on one house can offset the income from the other.


Q. Mike
My wife and I have recently had our pension reduced and an overpayment registered. We have two rental units, one of which makes a profit and the other a loss of a similar amount. The Department of Veteran Affairs (DVA) told me that welfare legislation is different to taxation legislation as losses cannot be offset against profit.

Subsection 46C(4) of the Veterans’ Entitlements Act states: “If the amount of the allowable deductions relating to a property for a period under section 81 of the income Tax Assessment Act 1997 exceeds the amount of the rental, income from that property for that period is taken to be nil.”

This is understandable but the DVA then goes on to say that “this means that therefore losses from one property cannot offset profit from another”.

DVA and Centrelink both mention that this is the case but I am wondering if they are correct?

A. The information you have found is absolutely correct.

If you make a loss from an investment property, then that income will be treated as zero.

However, it is not possible to offset the loss from an investment property against the income from another property or against any other source of income.

You also can’t claim the same deductions for an investment property that you can claim in your tax return.

You can claim loan interest payments, rates and costs to maintain the property, but you will not be able to claim capital depreciation, costs to build or the cost of borrowing money, such as loan establishment fees.

If you have found that the changes to your pension as a result of this situation has changed your retirement outlook, you should consult with a financial adviser on the best way to proceed.

Do you have investment properties and receive the Age Pension? What advice do you have for Mike?

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    Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.


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    23rd Nov 2020
    If you set up a Real Estate Renting Company, then surely it is the company making or losing as a whole, just as if you make a loss on the chips but good money on the fish it is the total take at the end of the month that tells you if you are winning or losing.
    Any way just a thought, - and no doubt a certain amount of paperwork.
    23rd Nov 2020
    Yes, I wondered that as well, Lookfar.
    23rd Nov 2020
    All I can say lucky you for having two rental properties and how convenient that one makes a profit and the other makes an equal loss.
    Do you think people are stupid ?
    Obviously this is a setup .
    The Old Meanie
    23rd Nov 2020
    The article says “similar” not equal. It still explains the principle of Assessment of loss making rental properties regardless of the source or amount of other income. Whether the question is genuine or “a setup” is immaterial as the answer is educational.
    23rd Nov 2020
    I agree with tobymyers. If you don't like the rules sell the property making a loss, problem solved then use to fund your retirement.
    The Old Meanie
    23rd Nov 2020
    This is the rule for investment properties. If you can show that income from property is your business ie intended main source of income, more properties than a general investor, then you can ask that they are assessed this way. If they were in a single company or trust structure, this would happen anyway.
    23rd Nov 2020
    Say what you please it is still a setup .
    23rd Nov 2020
    I am on full pension, and 12 months ago sold my investment property at a loss of nearly $65,000. I have just received my tax assessment (done by my accountant) - a tax bill for $1.05. Still trying to work it out.
    23rd Nov 2020
    And when you sent the cheque in the stamp is $1.10 (unless you have a concession stamp).
    24th Nov 2020
    don't use Post like Mariner suggests pay on line but set up automatic payment system ( eg Bpay ) of $0.5c per time leading up to due date.
    Cost you nothing but will sure as hell annoy the hell out of the ATO.
    23rd Nov 2020
    Had an investment property, rental income was counted but the outgoings were not (council rates, real estate agent fees, repairs etc). Sold it and I was happy and so was C/Link. My pension was $148 a fortnight (married one qualified) and after the sale my pension went to $590 a fortnight. Asset went up and income disappeared, was 7 Years ago.
    23rd Nov 2020
    Can't take it with you so sell it.

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