Apportionment of other expenses
Warning:
This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.
End of attentionIf you use your property for both private and income-producing purposes, you cannot claim a deduction for the portion of any expenditure that relates to your private use. Examples of properties you may use for both private and income-producing purposes are holiday homes and time share units. In cases such as these you cannot claim a deduction for any expenditure incurred for those periods when the home or unit was used by you, your relatives or your friends for private purposes.
In some circumstances it may be easy to decide which expenditure is private in nature. For example, council rates paid for a full year would need to be apportioned on a time basis according to rental and private use where a property is used for both purposes during the year.
In other circumstances where you are not able to specifically identify the direct cost, your expenses will need to be apportioned on a reasonable basis. For more information about situations where apportionment of expenses may be necessary, read the section Rental expenses.
There are a number of methods of apportionment. The following examples illustrate a basis for apportionment of some other rental property related expenses. There is also an example of Apportionment of interest.
Example: Renting out part of a residential property
Michael's private residence includes a self-contained flat. The floor area of the flat is one-third of the area of the residence.
Michael rented out the flat for six months in the year at $100 per week. During the rest of the year, his niece Fiona lived in the flat rent free.
The annual mortgage interest, building insurance, rates and taxes for the whole property amounted to $9,000. Using the floor area basis of apportioning these expenses, one-third – that is $3,000 – applies to the flat. However, as Michael used the flat to produce income for only half of the year, he can claim a deduction for only $1,500 – half of $3,000.
Assuming there were no other expenses, Michael would calculate the net rent from his property as:
Gross rent
(26 weeks × $100)
|
$2,600
|
Less expenses
($3,000 × 50%)
|
$1,500
|
Net rent
|
$1,100
|
End of example
Example: Apportionment of expenses where property is rented for part of the year
Mr Hitchman's brother, Dave, owns a property in Tasmania. He rents out his property during the period 1 November 2002 to 30 March 2003 -a total of 150 days. He lives alone in the house for the rest of the year. The council rates are $1,000 per year. He apportions the council rates on the basis of time rented.
Deductible expenses × portion of year = deductible amount
He can claim a deduction against his rental income of
$1,000 × (150 ÷ 365) = $411
If he had any other expenses, these too may need to be apportioned.
End of exampleFor more information about the apportionment of expenses, see Taxation Ruling IT 2167 Income tax: rental properties-non-economic rental, holiday home, share of residence, etc. cases, family trust cases and Taxation Ruling TR 97/23 Income tax: deductions for repairs.
Last modified: 04 Dec 2005QC 27452