Information to help rental property owners.
Owning and renting a property
Rental properties 2022 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)
- general value shifting regime
- goods and services tax (GST)
- negative gearing
- pay as you go (PAYG) instalments.
No deductions for vacant land
You can no longer claim tax deductions for the cost of holding vacant land. These changes apply to costs incurred from 1 July 2019, even if you held the land before that date.
Land will be considered vacant if:
- it does not contain a substantial and permanent structure
- it contains a substantial and permanent structure and the structure is a residential premises which was constructed or substantially renovated while the entity held the land and the premises are either
- not yet lawfully able to be occupied
- lawfully able to be occupied but not yet rented or made available for rent.
For more information, see Deductions for vacant land.
Tax and COVID-19
Your rental property income and deductions may have been affected by COVID-19. For more information, see COVID-19 frequently asked questions and Commercial rent or lease payment changes.
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 your tax records, and make reasonable estimates where necessary.
Phone our Emergency Support line 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.
Granny flat arrangements and capital gains tax
From 1 July 2021, provided certain conditions are satisfied, no capital gains tax event will arise if an eligible arrangement is entered into that creates in eligible individuals a granny flat interest. Likewise if an existing arrangement is varied or terminated. A granny flat arrangement is a written agreement that gives an eligible person the right to occupy a property for life.
A granny flat arrangement is exempt from CGT if:
- the owner or owners of the property are individuals
- one or more eligible people have an eligible granny flat interest in the property
- the owners and the people with the granny flat interest enter into a written and binding granny flat arrangement. This arrangement must not be commercial in nature.
Other CGT events that are not related to a granny flat arrangement, or sit outside the arrangement, are subject to normal CGT rules. For example, the sale of a property that was used in a granny flat arrangement, which has since terminated, is subject to the normal CGT rules.
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.
Continue to: Rental income or Rental expenses