Rental properties 2019 will help you, as an owner of rental property in Australia, determine:
- which rental income is assessable for tax purposes
- which expenses are allowable deductions
- which records you need to keep
- what you need to know when you sell your rental property.
Many, but not all, of the expenses associated with rental properties will be deductible. This guide explains:
- how to apportion your expenses if only part of them are tax deductible
- what expenses are not deductible
- when you can claim those expenses that are deductible
- some you can claim in the tax return for the income year in which you spent the money
- others must be claimed over a number of years (including decline in value of depreciating assets and capital works expenses).
The examples given in this publication featuring Mr and Mrs Hitchman are based on the assumption that the Hitchmans own their rental properties as joint tenants who are not carrying on a business of letting rental properties.
When you own a rental property, you may also need to know about:
- capital gains tax (CGT)
- goods and services tax (GST)
- negative gearing
- pay as you go (PAYG) instalments.
Changes to deductions for travel expenses
From 1 July 2017, travel expenses relating to a residential rental property are generally:
- not deductible, and
- not recognised in the cost base or reduced cost base of the property for CGT purposes.
Travel expenses are the costs of travel, accommodation and meals, to inspect, maintain or collect rent for the property. For the meaning of 'residential rental property', see Definitions.
You can continue to deduct travel expenses relating to your residential rental property if:
- you are using the property in carrying on a business (including a business of letting rental properties), or
- you are an excluded entity. For the meaning of 'excluded entity', see Definitions.
For more information, see:
- Expenses for which you cannot claim deductions
- Travel and car expenses
- Law Companion Ruling LCR 2018/7
- Capital gains tax.
Changes to deductions for decline in value of second-hand depreciating assets
From 1 July 2017, the rules for deductions for decline in value of certain second-hand depreciating assets in your residential rental property have changed. If you use these assets to produce rental income from your residential rental property, you cannot claim a deduction for their decline in value unless you are using the property in carrying on a business (including a business of letting rental properties), or you are an excluded entity.
This change generally applies to the depreciating assets that you:
- entered into a contract to acquire, or otherwise acquired, from 7.30 pm on 9 May 2017, or
- used, or had installed ready for use, for any private purpose in 2016–17 or earlier, for which you were not entitled to a deduction for a decline in value in 2016–17 (for example, depreciating assets in a property that was your home in 2016–17 that you turned into your residential rental property in 2017–18).
There are no changes to the rules about deductions for decline in value of new depreciating assets in your residential rental property.
There are no changes to the rules about deductions for decline in value of depreciating assets in your residential rental property that you installed or used for a taxable purpose other than the purpose of deriving rental income.
For more information, see Limit on deductions for decline in value of second-hand depreciating assets.
Tax and natural disasters
We have special arrangements for people affected by natural disasters such as a cyclone, flood or fire occurring during the financial year. For more information, see Dealing with disasters.
If your tax records were lost or destroyed, we can help you to reconstruct them, and make reasonable estimates where necessary.
Phone our emergency support team on 1800 806 218 and we can discuss the best way we can help you.
We can also:
- fast track refunds
- give you extra time to pay debts, without interest charges
- give you more time to meet activity statement, income tax and other lodgment obligations, without penalties
- help you if you are experiencing serious hardship.
Publications and services
To find out how to get a publication referred to in this guide and for information about our other services, see More information.
Is your rental property outside Australia?
If your property is located outside Australia, special rules apply to the deductibility of your rental property expenses. For more information on foreign source income, see Question 20 in the tax return instructions. If you are unsure of your obligations, contact your recognised tax adviser or us.
Rental income
Rental and other rental-related income is the full amount of rent and associated payments that you receive, or become entitled to, when you rent out your property, whether it is paid to you or your agent. You must include your share of the full amount of rent you earn in your tax return.
Your rental income also includes rent or associated payments that you receive, or become entitled to, when renting out part or all of your home through the sharing economy or the renting of your holiday home.
Rent and associated payments may be in the form of goods and services. You will need to work out the monetary value of these. For example, if the tenant gives you property or goods as rent instead of money, you include the market value of the property or goods as rental income in your tax return.
Rental-related income
You must include rental bond money as income if you become entitled to retain it, for instance, because a tenant defaulted on the rent, or because of damage to your rental property requiring repairs or maintenance.
If you received an insurance payout, there may be situations where the payout needs to be included as income, for example, if you received an insurance payment to compensate you for lost rent.
If you received a letting or booking fee, you must include this as part of your rental income.
Associated payments include all amounts you receive, or become entitled to, as part of the normal, repetitive and recurrent activities through which you intend to generate profit from the use of your rental property.
If you received a reimbursement or recoupment for deductible expenditure, you may have to include an amount as income. For example, if you received:
- an amount from a tenant to cover the cost of repairing damage to some part of your rental property and you can claim a deduction for the cost of the repairs, you need to include the whole amount in your income
- a government rebate for the purchase of a depreciating asset, such as a solar hot-water system, you may need to include an amount in your income. For more information, see Taxation Determination TD 2006/31 – Income tax: is a government rebate received by a rental property owner an assessable recoupment under subsection 20-20(3) of the Income Tax Assessment Act 1997, where the owner is not carrying on a property rental business and receives the rebate for the purchase of a depreciating asset (for example, an energy saving appliance) for use in the rental property.
You must include as rental income any assessable amounts relating to limited recourse debt arrangements involving your rental property. For more information, see: