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  • Rental expenses to claim

    If you rent out your property or it is genuinely available for rent, you can claim deductions for most of the expenses you incur in these periods.

    You only claim deductions for the expenses that relate to the income-producing use of the property.

    You can't claim a deduction for expenses for your personal use of the property.

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    Watch: When can I claim a deduction for rental expenses?

    Media: When can I claim a deduction for rental expenses?
    http://tv.ato.gov.au/ato-tv/media?v=bd1bdiun85itedExternal Link (Duration: 3:07)

    Rental expense categories

    There are three rental expense categories, those for which you:

    • can claim a deduction now (in the income year you incur the expense) – for example, interest on loans, council rates, repairs and maintenance and depreciating assets costing $300 or less
    • can claim a deduction over several years – for example, capital works, borrowing expenses and the decline in value of depreciating assets
    • can't claim a deduction – for example, personal expenses, some expenses of a capital nature and the purchase of second-hand (or used) depreciating assets after 9 May 2017.

    There are also some expenses you can claim a deduction for prior to the property being genuinely available to rent – such as such as interest on loans. You must incur these expenses with the intent to rent out the property. For example, renovating a property you intend to rent. If your intention changes you can't claim your expenses.

    It is important to claim each expense under the correct expense type to make sure you treat it correctly for tax purposes.

    Claim the right amount of expenses

    You will need to work out the amount of the expense that relates to your income-producing activities, if any of the following apply:

    • your property is only genuinely available for rent for part of the year
    • you use your property for personal purposes for part of the year
    • you only use part of your property to earn rent
    • you rent your property at non-commercial rates (less than market rates)
    • you partially use your investment loan for personal purposes.

    You may need to decide which of your expenses are private in nature. As a general guide, you should work out your expenses on a floor-area basis, based on the area solely occupied by the tenant. You can add to that a reasonable amount based on the tenant's access to common areas.

    However, it may not be appropriate to work out some of your expenses on the same basis. For example, expenses such as advertising for tenants and real estate commissions that relate solely to renting out of the property are fully deductible.

    Positive or negative gearing

    Your rental property is 'positively geared' if your deductible expenses are less than the income you earn from the property – that is, you make a profit from renting out your property.

    Your rental property is said to be 'negatively geared' if your deductible expenses are more than the income you earn from the property.

    The overall tax result of a negatively geared property is a net rental loss. In this case, you may be able to claim a deduction for the full amount of rental expenses against your rental and other income – such as salary, wages or business income. If your other income is not enough to absorb the loss, you can carry forward your loss to the next income year.

    Changes to expenses you can claim

    Find out about changes to expenses you can claim below.

    Deductions for vacant land

    You can no longer claim a deduction for the cost for holding vacant land from 1 July 2019. For more information. see Deductions for vacant land.

    Supplier ABN's

    When you hire a contractor for services and repairs connected with your rental property, you will need to check they have an Australian business number (ABN). If they do not provide you with their ABN, you may have to withhold 47% from the payment you make to them and transfer that withheld amount to us.

    You may not be able to claim deductions for these expenses, if you don't withhold when you were required to.

    See also:

    Rental expenses and your tax return

    You include rental expenses you can claim a deduction for in your tax return. Depending on your situation, you will first need to select:

    • 'You had Australian interest, or other Australian income or losses from investments or property'
    • 'Other foreign income' from overseas property.

    Once you have completed the rental property details and the related income fields, you can add in your expenses in the 'Rental expenses' fields.

    Watch: How to include rental income and expenses in myTax

    Media: How to include rental income and expenses in myTax
    https://tv.ato.gov.au/ato-tv/media?v=bd1bdiubtjsfhwExternal Link (Duration: 1:56)

    Last modified: 14 Jul 2021QC 23633