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07 Dec 2018 Regarding Senior Tax Counsel’s report ‘Labor’s negative gearing restrictions – how might they work?’

Editor’s note: Bob Deutsch’s article on the Labor party’s proposed changes to negative gearing can be found in TaxVine 44 (16 November 2018). 

MEMBER 401 writes: 

Dear Bob, 

Thank you for your notes on Labor’s negative gearing restrictions. Can I ask the following questions: 

Are we to assume that negative gearing applies to people in small business as well who might rent from their family trust? This could be an office, or a shop, or a warehouse and people may have chosen to use a family trust, perhaps for asset protection purposes. In this instance, are we correct in saying that the family trust would not get the benefits of negative gearing? 

If a client has a property that is positively geared – be it a shop/factory/warehouse etc – and all of a sudden, the tenants disappear and there is a period with no tenancy, can we assume that the loss incurred during this period won’t be deductible unless it is against future rent? 

I believe a scenario that could affect thousands of people, would be where people are living in a home and for business purposes they are either transferred interstate or overseas. For example, a client moving to Canberra for two years rents out their Melbourne home; can I assume that in this scenario the loss is not deductible if the house wasn’t a rental property prior to the change in negative gearing ruling? What then does happen to that loss going forward since it’s the clients PPR and there’s really nothing to deduct it against in the future. 

I look forward to hearing your thoughts, many thanks Bob.

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