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Four Tests Real Property

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Can anyone assist me with the Four Tests rule for offsetting losses.

 

Specifically the Real Property test.

 

My scenario is that my parents own farm land that exceeds the 500k threshold stated for the real property test. The land isnt being used for anything, if I use this land to start operating a farming business can I offset my losses against my tax from my primary job or will I have to carry them over as losses.

 

Do I need to be renting the land to use the Real Property Test or is it ok to simply be using the land?

 

My understanding from reading the rule is that I can offset any losses as long as the business is using land valued over 500k.

 

Any advice would be greatly appreciated.

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Hi @mpfarmer,

 

Welcome to our Community!

 

You may satisfy the test if you own real property or have an interest in real property (such as a lease of business premises), and the real property:

  • Has a value of at least $500,000, and
  • Is used on a continuing basis in a business activity

If you own or have an interest in real property which has a continuous business activity and meet the income requirements, you can offset your business losses against your other income in the financial year.

 

If the real property is used partly for private and business purposes, you can only include the portion used for business purposes.

 

If you have further questions, you can phone us on 13 28 61 between 8am - 6pm, Monday to Friday to speak with an operator.

 

Thanks, JodieH.

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Most helpful response

ATO Certified Response

Community Support

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Hi @mpfarmer,

 

Welcome to our Community!

 

You may satisfy the test if you own real property or have an interest in real property (such as a lease of business premises), and the real property:

  • Has a value of at least $500,000, and
  • Is used on a continuing basis in a business activity

If you own or have an interest in real property which has a continuous business activity and meet the income requirements, you can offset your business losses against your other income in the financial year.

 

If the real property is used partly for private and business purposes, you can only include the portion used for business purposes.

 

If you have further questions, you can phone us on 13 28 61 between 8am - 6pm, Monday to Friday to speak with an operator.

 

Thanks, JodieH.