5. Can I negative gear the overseas investment property against my Australian income?
The short answer is yes.
Previously, any net foreign loss incurred by an Australian tax resident could only be offset against other foreign income of certain classes.
From 1 July 2008, any net foreign loss incurred may be offset against any Australian sourced income derived. If the foreign loss is not used, it may be carried forward indefinitely to offset any future income derived, regardless of whether the future income is sourced from Australia or otherwise.
There are transitional rules that govern how certain foreign losses incurred before 1 July 2008 may be converted to ordinary tax losses to be offset against Australian domestic income. These rules are complex and certain calculations are required to determine how much of the foreign losses may be converted to ordinary tax losses and utilised.