Investment real estate includes rental properties, vacant land, holiday houses and hobby farms, but not your own home.
You need to include rental income in your tax return each year.
Any profit (capital gain) you make when you sell an investment property is also income that you need to include in your tax return, although you can offset it against a capital loss if you have one.
You can claim deductions for many of the expenses associated with obtaining, owning and disposing of a rental property, although some you can only include when you sell the property. You use these to decrease the amount of capital gain you may make.
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Your home (referred to as your 'main residence' for CGT purposes) is subject to CGT only if you rent it out or use it for a business at any time while you own it.
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Obtaining an investment property
When you obtain a rental property, it's important to start keeping records straight away. You'll want proof of your expenses from the beginning so you can claim everything you're entitled to. You'll also need records of the date and costs of buying the property when you go to work out any capital gain (or capital loss) when you dispose of it.
Owning an investment property
While you own the property you need to keep track of any income and expenses related to it. You also need to keep track of any significant changes - for example, if you carry out repairs or improvements or subdivide and sell some or all of the property. Rental income, and profit when you sell, is taxable - some costs are tax deductible the year you incur them, others can be used to reduce your profit (capital gain) when you sell.
Disposing of an investment property
When you dispose of an investment property you pay tax on any capital gain, which is the difference between what it cost you to get, maintain and improve the property and what you receive when you dispose of it.
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For more information, refer to:
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Sections within Rental properties and other real estate
Last Modified: Friday, 30 September 2011