3.9.3.38 Total net investment loss - net rental property loss

Summary

This topic contains information on the assessment of net rental property loss, which is the second component of 2 components that make up a person's total net investment loss. The first component is net investment loss (refer to 3.9.3.37).

Act reference: SSAct section 1071 Seniors Health Card Income Test Calculator, section 1071-3 Adjusted taxable income

Policy reference: SS Guide 3.9.3.30 Assessment of income for CSHC, 3.9.3.40 Treatment of income components for CHSC

Assessing net rental property loss

The ATO allows net rental property loss as a deduction from assessable income in deriving a person's taxable income. For CSHC income test purposes, net rental property loss is added back to the person's taxable income to determine their assessable income.

The amount of net rental property loss that an applicant and/or their partner (1.1.P.85) receives from rental property is assessed for a CSHC. This applies to residential and commercial land and buildings.

A net rental property loss declared as a loss by a partnership or trust is NOT to be added back in the assessment of income for CSHC even where it is declared to the ATO on a person's income tax return.

Act reference: SSAct section 1071 Seniors Health Card Income Test Calculator, section 1071-3 Adjusted taxable income

Assessing net rental property loss - negative income

If a person has a tax loss because of a net loss from their rental property, their taxable income is zero. To calculate the amount of CSHC assessable income, the net rental property losses are added to the person's other assessable income.

Explanation: 'Taxable income' is defined in section 23 of the SSAct by referencing section 4-15 of the Income Tax Assessment Act 1997, which provides that if deductions exceed income, taxable income is $0, rather than negative.

Example: A person provides the following estimate of their income:

Income from wages $10,000
Rental income $20,000
TOTAL ASSESSABLE INCOME $30,000
Rental costs -$35,000
TAXABLE INCOME $0
TAX LOSS -$5,000
CSHC ADJUSTED TAXABLE INCOME $15,000

The taxable income is zero, to which is added the net rental property losses of $15,000, giving an income of $15,000.

Act reference: SSAct section 23(1)-'taxable income'

Assessing net rental property loss - members of a couple

An applicant's and their partner's income must be calculated separately, before being combined.

Last reviewed: 21 September 2020