• 9 Rent

    Former STS taxpayers still using the STS accounting method

    If the trust is eligible and has chosen to continue using the STS accounting method, base the gross rent at F, interest deductions at G, and general deductions and repairs included at H on the STS accounting method.

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    Small business entities

    Depreciating assets used in rental properties are generally excluded from the small business entity depreciation rules on the basis the assets are part of property that is subject to a depreciating asset lease.

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    If the sole reason you derived income jointly (or in common) with another person was that you were a part owner of a property available for rent, but you were not in a trust carrying on a business of renting out properties, do not show any income or deductions from that rental property at this item. Show your share of the income or deductions at item 21 Rent of your Tax return for individuals (supplementary section) 2016 or the relevant items of the company, trust or fund tax return or the self-managed superannuation fund annual return.

    For more information to help you work out whether you are carrying on a business, see TR 97/11 Income tax: am I carrying on a business of primary production?

    Gross rent

    Show at F the gross amount of rental income. This item cannot be a loss.

    Rental income includes booking or letting fees, bond monies if the trust becomes entitled to retain them, any insurance payouts that compensate for lost or forgone rent, and reimbursements from tenants of deductible expenses incurred.

    If the trust is registered for GST, and GST is payable in relation to rental income, exclude the GST from gross rent at F.

    Show rent from foreign sources at item 23 Other assessable foreign source income.

    Lease premium received from a CGT event

    A capital gain or a capital loss made from the receipt of a lease premium is shown at item 21 Capital gains.

    For more information about CGT events involving leases, see the Guide to capital gains tax 2016.

    Interest deductions

    If borrowed monies are used to finance a property investment, interest paid on the borrowing generally is deductible.

    However, the thin capitalisation rules may apply to reduce interest deductions. These rules place a limit on the amount of interest and other borrowing costs that can be deducted for Australian tax purposes: for more information see Appendix 3. The disallowed amount reduces the amount that would otherwise be included at G.

    If the TOFA rules apply to the trust, include all interest expenses incurred on monies borrowed to finance a property: this includes interest expense from financial arrangements subject to the TOFA rules at G.

    Show at G the total deductible amount of interest expense incurred in earning the rental income.

    Capital works deductions

    Show at X the total capital works deductions amount for rental buildings and structural improvements, such as fences, retaining walls and sealed drive ways. For information on capital works deductions, see Appendix 5.

    Other rental deductions

    Show at H the total of other deductible expenses incurred in earning rental income.

    If the trust is registered for GST and GST is payable in relation to rental income, exclude any input tax credit entitlements that arise in relation to expenses from the amount shown at H.

    Expenses listed here that are costs associated with borrowing and servicing debt may not be allowable deductions under the thin capitalisation rules, see Appendix 3. The disallowed amount reduces the amount that would otherwise be shown at H.

    Deductions for the decline in value of depreciating assets used to earn rental income are generally shown at H. However, if the trust has allocated some of these assets to a low-value pool, you may need to show deductions at 18 Other deductions, see Appendix 6.

    Net rent

    Show at this entry the net amount of any rent. If this amount is a loss, print L in the box at the right of the amount.

    See also:

    Tax agents who lodge trust tax returns through ELS must complete the Partnerships and trusts rental property schedule 2016 if item 9 Rent is completed. You do not have to complete the schedule if you are lodging a paper version of the trust tax return.

    Last modified: 31 Aug 2016QC 48243