Chapter 7 - Timing of introduction of the rules

7.1 It is proposed that the loss ring-fencing rules will apply from the start of the 2019–20 income year.

7.2 The rules could either apply in full from the outset, or alternatively they could be phased in over two or three years. If the rules are phased in, this would be done by reducing the proportion of losses that could be used to offset other income over a two or three year period, until no losses could be used to offset other income sources. For example, if phased in over two years, 50 percent of residential investment losses could be used to offset other income in 2019–20, and no offsetting would be allowed in 2020–21.

7.3 Tax law changes are not usually phased in. But this possible approach has been suggested to allow affected investors more time to adjust to the new rules, or to rearrange their affairs before the rules apply in full. However, we note that phased introduction of the rules would result in some additional complexity.

7.4 We are interested in feedback on whether the loss ring-fencing rules should apply in full from the 2019–20 income year – the simpler approach – or be phased in over two or three years.