3.9.3.38 Total Net Investment Loss - Net Rental Property Loss

Summary

This topic contains information on the concept and 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 Taxable 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 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 regardless of:

  • the nature of the ownership (the person may be an owner, mortgagee, lessee or lessor), OR
  • whether the income results from a property investment or not (if part of a person's principal home is rented out, any rental property losses will be assessed as well as any rental property losses a person has from investment properties).

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 Taxable Income Test Calculator, section 1071-3 Adjusted taxable income

Assessing net rental property loss - negative income

If a person's taxable income is calculated to be a negative value, it is taken to be zero, before adding the net rental property losses and the other income components.

Explanation: This is because taxation legislation provides for losses to be carried forward to the next tax year. While the person may not receive the benefit of the loss in one year, it is carried forward to reduce their taxable income for the next year.

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

Income from wages: $10,000
Loss from real estate: $15,000
Taxable income: -$5,000

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

Assessing net rental property loss - members of a couple

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

Determining if an estimate is reasonable

In 2009-10 a person may only use an estimate of their total net investment loss.

From the 2009-10 financial year a person's total net investment loss will appear in their TNA.

Factors to be considered when deciding whether an estimate is reasonable are:

  • whether the applicant's explanation of how they calculated the estimate is consistent with the estimated amount, and
  • the reason for change in income.

Act reference: SSAct section 1071 Seniors Health Card Taxable Income Test Calculator

Policy reference: SS Guide 3.9.3.40 Treatment of Income Components for CSHC

Last reviewed: 17 August 2015