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  • Owning a rental property

    When you own a rental property, you need to:

    • keep records right from the start, so you can meet your tax obligations
    • work out how to divide income and expenses (if you co-own the property with someone else)
    • pay instalments towards your end-of-year tax liability.

    Generally, you only declare income and claim expenses if your name is on the title deed.

    On this page:

    Rental records you need to keep

    Records must be in English (or readily translatable into English) and kept for five years from the date your tax return is lodged.

    You must keep records of:

    • the date and costs of buying the property, so you can work out any capital gain or loss when you dispose of it
      • remember, the date you enter into the contract is the purchase date for capital gains tax purposes (not settlement)
       
    • any rent and rent-related income, to report in your tax return
    • expenses, so you can claim deductions you're entitled to
      • these should include the:
        • name of the supplier
        • amount of the expense
        • nature of the goods or services
        • date the expense was incurred
        • date of the document
         
       
    • significant changes – for example, repairs or improvements, or if you sell part or all of the property
      • keep the costs of repairs or improvements separate from depreciation costs, so you can work out deductions and capitals gains or losses correctly
       
    • the costs of selling or disposing of the property, so you can work out any capital gain or loss.

    Some examples of records that will make it easier to complete your tax return include:

    • conveyance and loan documents
    • contracts of purchase and sale
    • receipts for expenses, like repairs, maintenance, insurance and purchases of depreciable assets
    • land tax assessments
    • bank statements and credit card records
    • tenant leases
    • rent records from managing agents.

    Find out more:

    See also:

    Co-ownership of rental property

    There are different tax implications depending on whether you're:

    Co-owners of an investment property

    A person who co-owns one or more investment properties is usually regarded as an investor rather than being in a rental property business.

    This means that rental income and expenses must be are divided among the co-owners according to their legal interest in the property. This is true even if there is an agreement between co-owners stating otherwise. If they own the property as:

    • joint tenants – they each hold an equal interest in the property
    • tenants in common – they may hold unequal interests in the property (for example, one may hold a 20% interest and the other an 80% interest).

    Watch: Co-owners of a rental property

    This video explains the rental income you must declare and the expenses you can claim if you co-own a rental property.

    Media: Co-owners of a rental property
    http://tv.ato.gov.au/ato-tv/media?v=bd1bdiun85ittq External Link (Duration: 02:18)

    Partners carrying on a rental property business

    Most rental activities are a form of investment and don't amount to carrying on a business. But if you're carrying on a rental property business in partnership with others, you must divide the net rental income or loss according to the partnership agreement. If you don't have a partnership agreement, you should divide your net rental income or loss between the partners equally.

    See also:

    Pay as you go instalments and withholding

    PAYG instalments

    If you make a profit from renting your property, you may need to make pay as you go (PAYG) instalments towards your expected end-of-year tax liability.

    Generally, you need to pay PAYG instalments if:

    • you reported gross business or investment income (including rental income) of $4,000 or more (or $1 for foreign residents) in your most recent income tax return; and
    • the tax outstanding on your income tax assessment is more than $1,000.

    If you're required to pay PAYG instalments, we'll notify you.

    See also:

    PAYG withholding

    If your property is negatively geared (that is, has more expenses than profits), you may be able to reduce how much tax is deducted from your regular salary or wages (the PAYG withholding rate). This can help better match your end-of-year tax liability (rather than paying too much throughout the year).

    If you believe you need to reduce your PAYG withholding rate, you can apply to us for a downwards variation.

    Next step:

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    Last modified: 24 Jun 2020QC 23627