Do you pay tax if running at a loss ?
- Thread starter Bez
- Start date
I'm not an accountant, and this is a very broad description of how it is worked out (correct me if I'm wrong any bean-counters watching):
you have a taxable income from your job.
you add the rent to this.
this gives you a NEW taxable income, which will be higher, and you haven't paid enough tax.
then you apply all the tax deductions from the property expenses and depreciation to the new taxable income.
this gives you yet another taxable income, which is usually lower than your original taxable income from your job.
now you have paid too much tax on the new taxable income.
the tax refund is the difference between the original tax you paid from the taxable income from your job, and the tax you should be paying from the last taxable income after all the property stuff has been applied.
Clear as mud.
you have a taxable income from your job.
you add the rent to this.
this gives you a NEW taxable income, which will be higher, and you haven't paid enough tax.
then you apply all the tax deductions from the property expenses and depreciation to the new taxable income.
this gives you yet another taxable income, which is usually lower than your original taxable income from your job.
now you have paid too much tax on the new taxable income.
the tax refund is the difference between the original tax you paid from the taxable income from your job, and the tax you should be paying from the last taxable income after all the property stuff has been applied.
Clear as mud.
Hi guys, just wondering if your properties is running at a loss do you still pay tax on the rental income ?
eg.
$10000 in deductions including interest on loan, and rental income of $8000.
Do I pay tax on the $8000 income ?
Thanks
The general rule is that you pay tax on NET income. So if you had nothing but the above, you would have a net LOSS of 2,000, and no tax is payable. Your tax bill at the end of the year is zero and you have a loss of 2k to apply to next year's NET income, if you have any.
In practice, of course, most of us have other income such as from a job, so that is added to your net income.
The order works something like this:
Add all income and deductions together
Determine tax payable
Deduct any tax already paid (franking credits, PAYG, etc)
Determine net tax payable / refundable
Alex
