When a leveraged investment property runs a net tax loss (rent minus interest, expenses and depreciation), and the loss offsets the investor’s salary or other income, reducing total tax payable.
Enabled by the general deduction rule (s 8-1 ITAA 1997) and the loss treatment in Div 36. The proposed 2027 reform restricts this offset for established residential property acquired after Budget night: net losses cannot offset salary from 2027-28; they carry forward against future residential rental income only.