RENTAL LOSSES AND RING FENCING
If your residential rentals are likely to run at a loss, then this is the last year (to 31/3/19) that the loss can be used to offset and reduce any other income that you may have (eg a wage), to get a tax refund, or a tax reduction.
After 31/3/19 residential rental losses cannot be used to reduce your “other” income but need to be carried forward until you earn residential rental income. This is called loss ring fencing.
If your residential rentals are likely to run at a loss next year, then you could incur expenses before 31/3/19 to claim expenses in advance. For example, doing repairs in March, even if they are paid later, in April 2019.
Some types of expenses can be paid in advance (before 31/3/19) and be claimed in this tax year ended 31/3/19. This is better than them being ring fenced & having to wait for many tax years to qualify for a tax deduction.
See the table below for some types of expenses that can be paid in advance. Please note that limits apply so you would do well to discuss these with us first. Accounting fees can be prepaid or a binding contract can be agreed that will also allow these to be claimed by 31/3/19.
| Description of expenditure | Maximum total amount of unexpired portions | Time period between balance date and expiry date |
|---|---|---|
| Insurance premiums under an insurance contract if the total amount of such expenditure incurred in the income year in respect of the contract does not exceed $12,000. | – | 12 months |
| Payment for the use or maintenance of telephone and other communication equipment. | – | 2 months |
| Costs of services, other than those dealt with elsewhere in this determination. | $14,000 | 6 months |
| Periodic charges, other than those dealt with elsewhere in this determination. | $14,000 | 12 months |
| Purchase of stationery. | – | Unlimited |
| Subscriptions for a newspaper, journal, or other periodical, including for the maintenance or annotation of a documentary information service. | – | Unlimited |
| Rates made and levied under Part 3 of the Local Government (Rating) Act 2002 to the extent of the amount invoiced on or before balance date. | – | Unlimited |
| Mandatory accounting costs. | – | Unlimited |
