If you have income from an investment property, it's important to know how to best manage your tax claim.
What are your obligations?
As a rental property owner you must be able to demonstrate that you’ve made every effort to rent your property out.
Some of your considerations might include:
- Collecting and producing evidence that it’s been advertised for rent
- Making sure the property is in good enough condition to attract renters
- Setting a realistic rental price
- Removing unreasonable restrictions that may deter renters
What income must you declare?
When you lodge your tax return, you need to tell the Australian Taxation Office (ATO) how much rent and rental-related income you received.
This can include:
- Rental bond returns e.g. if your tenant defaulted on rent or caused damage to your property
- Insurance payouts e.g. when you receive a payment to compensate for damage to your property
- Letting and booking fees you received
- Any amount a tenant pays you to cover the cost of repairs for which you then claimed a deduction (assuming, for example, the tenant has caused the damage themselves)
What expenses can you claim?
Property investors can claim deductions for several expenses while their property is rented or available for rent.
These can include:
- Management costs such as property agent fees and commission
- Land tax
- Body corporate fees and charges
- Maintenance costs e.g. cleaning, gardening, pest control, repairs and maintenance
- Interest expenses
- Insurance (building, contents and public liability)
- Some legal expenses
You may be able to claim some of these costs now, but others, such as expenditure on capital works, may be deducted over time.
What can’t you claim?
Make sure you don’t claim any deductions that aren’t in fact deductible.
These can include:
- Expenses someone else has paid e.g. electricity bills paid by your tenant
- Property purchase costs e.g. advertising costs, stamp duty
For the most up-to-date requirements regarding taxation and residential rental properties, you can refer to the Australian Taxation Office (ATO) website.
Lodging your tax return
What you claim on your tax return depends on how you rented your property out, and whether or not you’re the sole owner.
For example, if you own the rental property with someone else, you can only declare your share of any income the property generates and claim your share of any expenses.
For the most up-to-date information, please refer to www.ato.gov.au
Things you should know
- The Australian income year ends on 30 June. You have from 1 July to 31 October to lodge your tax return for the previous income year. If you use a registered tax agent to prepare and lodge your tax return, you may be able to lodge later than 31 October
- Tax law is subject to change. Double-check on the ATO website
- The information provided is of a general nature and doesn’t take into account your personal, financial situation – we suggest you seek independent taxation and financial advice