This was my advice to my client "Please not when no rental income is declared then you are not allowed to claim deductions for that period." His response, [ Are you saying that if I have an empty property for which I can’t find tenants and still paying of
Important:
This answer is based on tax law year ending 28 February 2018.
Answer:
You are correct that, in order for any taxpayer to make a deduction, the requirement is that the taxpayer must be carrying on a trade. In this instance the trade is the letting of property – see section 1(1) of the Income Tax Act.
We accept that the person didn’t have a tenant who vacated the premises and that the taxpayer has not found a new tenant. In other words, the taxpayer has not commenced the trade yet. Section 11A of the Income Tax Act deals with expenditure (and losses) incurred prior to the commencement of an in preparation for carrying on a trade. These expenses are accumulated and can only be deducted when income is derived from the trade.
The expenses are declared in the return of income, but are then added back, in a sense. It is then carried forward to the next year of assessment. The reason why they are being carried forward is because the deduction is then, when the trade commenced, allowed under section 11A.