You can claim a deduction for certain expenses you incur for the period your property is rented or is available for rent. However, you cannot claim expenses of a capital or private nature -although you may be able to claim decline in value deductions or capital works deductions for certain capital expenditure or include certain capital costs in the cost base of the property for capital gains tax purposes.
There may be situations where not all your expenses are deductible and you need to work out the deductible portion. To do this you subtract any non-deductible expenses from the total amount you have for each category of expense; what remains is your deductible expense. This situation may arise if, for instance:
- The property is not available for rent for the full year
- you may need to apportion some of the expenses on a time basis.
- Only part of the property is used to earn rent -you can claim only that part of the expenses that relates to the rental income. As a general guide, apportionment should be made on a floor area basis
- that is, by reference to the floor area of that part of the residence solely occupied by the tenant, together with a reasonable figure for tenant access to the general living areas, including garage and outdoor areas.
- You combine travel to inspect or maintain your rental property with travel for private purposes -you may need to apportion your travel expenses.