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

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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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Written by Ben


Total Comments: 12
  1. 0

    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.

  2. 1

    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 .

    • 0

      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.

    • 1

      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.

  3. 0

    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.

  4. 0

    Say what you please it is still a setup .

  5. 0

    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.

    • 0

      And when you sent the cheque in the stamp is $1.10 (unless you have a concession stamp).

    • 0

      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.

  6. 0

    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.

  7. 0

    Can’t take it with you so sell it.



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