All Topics / Legal & Accounting / Can negative gearing losses be carried forward?

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  • Profile photo of PK GroverPK Grover
    Participant
    @pnts
    Join Date: 2015
    Post Count: 2

    I need advice on negative gearing of our two investment loans. Essentially, we have two investment properties in our joint names, myself and my wife, for the last almost 5 years which we have been negative gearing against our respective salaries. Unfortunately I have lost job and there is only little chance that I might find another one because of my age and that the funding in higher education and research is going from bad to worse. With my income gone, there is nothing against which I can negative gear my part of the investment loan. What do I do now? Can my negative income be carried forward until the properties are sold and thus adjusted against potential capitals gain?

    Also, I have heard that all investment properties should be made into a company because it gives some tax advantage. Is this correct? Can that be done now with our investment properties?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Yes any loss (negative income) can be carried forward till the next year, and then carried forward again until your income is positive.

    What can you do? Not much without changing ownership. Your wife could borrow to buy your share of the property. she could borrow to do so and claim the interest. It would be a CGT event and a stamp duty event, but you could be exempt from duty if the property is in VIC.

    Your comments about the company is not correct. If a company owned the property now for example there is no tax advantage at all. But if the income exceeded the rent the company would be paying 30% tax whereas you would be paying nothing up to $20k pa in income.
    transferring to a company will also result in CGT and stamp duty and later when the company sells the property there would be no CGT discount so 30% tax payable compared to a max of 25% for an individual.

    Are you able to divert some income from your wife to yourself?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of PK GroverPK Grover
    Participant
    @pnts
    Join Date: 2015
    Post Count: 2

    Thanks Terry. If I decide to carry forward the negative income (loss), do I need to complete any paperwork with ATO in advance for next year’s tax return? Will there be a special tax return form for reporting negative income (loss) to ATO?

    By the way, I didn’t know that my wife’s income could be diverted to me. Could you please elaborate on it or direct me to someone who could inform me as to how it can be done.

    Once again, thanks for your help

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    PK No special form required.

    The loss will be carried forward and reflect in your Tax Return.

    Cheers

    Yours in Finance
    0-40 Properties in a decade. Ask me how.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
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    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Thanks Terry. If I decide to carry forward the negative income (loss), do I need to complete any paperwork with ATO in advance for next year’s tax return? Will there be a special tax return form for reporting negative income (loss) to ATO?
    By the way, I didn’t know that my wife’s income could be diverted to me. Could you please elaborate on it or direct me to someone who could inform me as to how it can be done.
    Once again, thanks for your help

    Speak to your tax advisor about your situation and see if there is something you can contract with your wife to do so you receive income and she is able to claim it.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

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