Quite right they can't be offset. But that is only because they are taxed differently.
If capital gains were taxed as income, with an allowance for inflation , then the rationale for converting earned income to profits from capital appreciation largely falls over.
Run the figures on profit after tax and inflation on an investment and you will see what I mean.
Much is made of NG as the ultimate evil, but people overestimate the effects of its abolition.
A large part of the investment property market is neutrally ,or positively geared, but this still represents a distortion of the market , as profits are still concessionally taxed.
The question '' what is fair '' , is answered in my view by the statement ' if you make a real
dollar it is taxed the same, regardless of the measures taken to produce it ".