Residential Rental Loss Ring Fencing

Just a brief reminder for those who own residential rental properties.  Effective from this current financial year (the 2019/20 tax year) onwards, any rental losses you make can no longer be offset against other income earned.  Instead, these losses will be carried forward and applied against future residential rental profits.

This will usually result in tax being paid on a higher income (not the reduced income after applying the rental loss as may have been the case in prior years).  This could mean that you will have a higher amount of tax to pay (or will receive a lesser tax refund).

For some of you, this extra amount of tax may mean you now fall into the provisional tax regime, where Inland Revenue require you to pay tax instalments throughout the year (as noted previously the threshold for this is now $5,000 of Residual Tax).  Be wary if this does happen to you, as in this first year of paying provisional tax you will be paying tax towards your current years income as well as paying the tax on last year’s income (basically two years’ worth of taxes will be paid in the one year).