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  • Renting out part or all of your home

    If you rent out all or part of your home, the rent money you receive is generally regarded as assessable income. This means you:

    • must declare your rental income in your income tax return
    • can claim deductions for the associated expenses, such as part or all of the interest on your home loan
    • may not be entitled to the full main residence exemption from capital gains tax (CGT), meaning you'll have to pay CGT on part of any capital gain made when you sell your home.

    Good and services tax (GST) doesn't apply to residential rentals, so you're not liable for GST on the rent you charge. You also can't claim GST credits for associated costs.

    On this page:

    Income and expenses

    If you rent out all or part of your home at normal commercial rates, the tax treatment of income and expenses is the same as for any residential rental property.

    You must include the rental income in your income tax return and you can claim deductions for associated expenses, such as the interest on your home loan.

    If you are only renting part of your home, for example a single room, you can only claim expenses related to renting out that part of the house. This means you can't claim the total amount of the expenses you incur – you need to apportion the expenses.

    As a general guide, you should apportion expenses on a floor-area basis based on the area solely occupied by the renter (user) and add that to a reasonable amount based on their access to common areas.

    You can only claim a deduction for expenses when the room was rented to a client. If you use the room in any capacity when it's not occupied, for example for storage or as an office, you can't claim deductions.

    If you rent out all or part of your home at less than normal commercial rates – for example, you rent to a relative or friend at a reduced rate – this may limit the deductions you can claim.

    Note that payments from a family member for board or lodging are considered to be domestic arrangements and are not rental income. You can't claim deductions for expenses in these circumstances.

    See also:

    • Taxation Ruling IT 2167Income tax: rental properties - non-economic rental, holiday home, share of residence, etc. cases, family trust cases for information about situations involving non-commercial rental and renting to related parties
    • The sharing economy and tax

    Capital gains tax

    Generally, you don't pay CGT if you sell the home you live in (under the main residence exemption).

    However, if you've used any part of your home to produce income – for example, by renting out all or part of it – you're generally not entitled to the full exemption.

    To work out the capital gain that is not exempt, you need to take into account a number of factors, including:

    You can work out the proportion of your capital gain that is exempt from capital gains tax using the Property exemption tool.

    See also:

    Last modified: 10 Jun 2020QC 23622