21 Rent 2025

Things you need to know

Declare at this question rental income you earn and expenses you incur relating to your rental property in Australia.

You need to read Rental properties guide 2025 before you can answer this question.

If you don't earn rental income or your property wasn't available for rent, go to question 22 Life insurance companies and friendly society bonuses 2025.

Don't include at this question

Don't show at this question:

• a deduction for the decline in value of a low-value pool, show this at question D6 Low-value pool deduction 2025
• foreign source rental income, that is, rental income from properties outside Australia, show this at question 20 Foreign source income and foreign assets or property 2025
• expenses you incur in earning rental income from properties outside Australia, show these at question 20 Foreign source income and foreign assets or property 2025
• income you earn, or expenses you incur, from peer-to-peer sharing of your car, caravan or car parking space, show this at question 24 Other income 2025.

Capital gains tax

If you dispose of your property (for example, by selling it, gifting it or transferring it to someone else) in 2024–25, capital gains tax (CGT) might apply and you must read:

• question 18 Capital gains 2025
• Guide to capital gains tax 2025.

From 1 July 2021, if certain conditions are met, no CGT event arises when you agree to an eligible arrangement that creates, varies or ends an eligible granny flat interest. The exemption doesn't apply to other CGT events that:

• happen with such transactions
• don't relate to your granny flat interest’s creation, variation or termination.

Renting out part or all of your home

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

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

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

Payments from a family member for board or lodging are considered to be domestic arrangements and aren't rental income. You can't claim income tax deductions.

Co-ownership

If you derive rent jointly (or in common) with another person from a jointly held property where you aren't a member of a partnership carrying on a business of renting out properties, include your share of rent and expenses at this question.

If the title deed shows that you're a part owner of the property, include only your share of the rent and expenses in your tax return. For example, if you own half of the property, you should show half of the rent and claim half of the deductible expenses for the property. For more information on how to work out your share of the rent and expenses that you can claim, see Rental properties guide 2025.

Rental income

Rental income is the full amount of money you earn when you rent out your property (including renting out a room through the sharing economy). You must include any bond money you either:

• retain in place of rent
• kept because of damage to the property requiring repairs.

You must also include as income:

• an insurance payout for lost rent, or a reimbursement of any rental expenses, you claim in 2024–25 or in an earlier year
• fees retained from cancelled bookings.

Rental expenses

You can claim expenses relating to your rental property but only for the period your property is rented or genuinely available for rent. For example, where you advertise your property for rent without limiting its exposure to potential clients.

Expenses could include:

• advertising for tenants and property agent fees or commissions
• body corporate fees and land tax
• borrowing expenses
• interest expenses
• council rates
• decline in value of depreciating assets
• gardening, lawn mowing and pest control
• insurance
• repairs and maintenance
• legal expenses
• stationery and phone expenses
• water charges.

If you're renting only part of your home (for example, a single room), you can claim expenses related to renting out only that part of the house.

You can't claim the total amount of expenses relating to the whole property – for example, with council rates and interest expenses you need to apportion these expenses. As a general guide, you should apportion expenses on a floor-area basis using the area solely occupied by the renter (user) and add that to a reasonable amount based on their access to common areas.

You can claim expenses only for the period you rent the room in your home to a tenant. You can't claim deductions for expenses when the room isn't rented.

You can claim 100% of fees or commissions charged by a sharing economy facilitator or administrator.

For more information on apportionment, see Taxation Ruling IT 2167 Income Tax: rental properties – non-economic rental, holiday home, share of residence, etc. cases, family trust cases.

Renting out your holiday home

If you have a holiday home that you rent out, you must include the rent money you receive in your assessable income. You can also claim deductions for the associated expenses.

In deducting your expenses, you must ensure that you're apportioning expenses to account for any private use of the property. You can only claim expenses for periods that your holiday home is being rented or is genuinely available for rent.

Deductions for decline in value of depreciating assets

You may be able to claim a deduction for the decline in value of certain items, known as depreciating assets, that you acquire as part of the purchase of your property or that you subsequently purchase for your property.

A depreciating asset is an asset that has a limited effective life and can reasonably be expected to decline in value over the time it's used. Examples of depreciating assets are freestanding furniture, stoves, washing machines and television sets.

For a comprehensive list of depreciating assets found in residential rental properties, see Rental properties guide 2025.

Deductions for decline in value of second-hand depreciating assets

You can't claim a deduction for the decline in value of certain second-hand depreciating assets you acquire, or contracted to acquire, at or after 7:30 pm AEST on 9 May 2017 for your residential rental property, unless you're carrying on a business of letting rental properties.

This doesn't apply to assets you acquire with a new residential property if both of the following apply:

• no other entity is previously entitled to a deduction for the decline in value of these assets
• either
  • no one resides in the property before you acquire it
  • the asset is used, or installed for use, at the property, and you acquire the property within 6 months of it being built.

Second-hand depreciating assets are depreciating assets previously used, or installed ready for use:

• by another entity (except as trading stock)
• in your private residence
• for a non-taxable purpose, unless that use was occasional – for example, staying at the property for one evening while carrying out maintenance activities would be considered an occasional use.

You can't claim the decline in value of a depreciating asset that you use, or had installed ready for use, for any private purpose in 2016–17 or earlier, if you weren't entitled to a deduction for its decline in value in 2016–17. For example, depreciating assets in a property that was your home in 2016–17 that you turned into your residential rental property after 30 June 2017.

For more information on the limit on deductions for the decline in value of second-hand depreciating assets in your residential rental property, including how the rules apply to the low-value pools, see Rental properties guide 2025.

Guide to depreciating assets 2025 and Rental properties guide 2025 will help you understand the rules for working out your deduction for decline in value and other aspects of rental property ownership. Guide to depreciating assets 2025 also contains details on when an immediate deduction can be claimed for depreciating assets.

If you choose the low-value pool method to calculate the decline in value of low-cost and low-value assets, read question D6 Low-value pool deduction 2025 and claim your low-value pool deduction at question D6.

Residential rental property travel expenses

Travel expenses relating to your residential rental property aren't deductible unless you're carrying on a business of letting rental properties. You also can't include them in the calculation of your capital gain or capital loss when you dispose of the property.

If your travel expenses relate to your residential rental property and another income producing activity, you'll need to apportion the expenses on a fair and reasonable basis.

Prepaid expenses

If you prepaid a rental property expense, such as insurance or interest on money you borrow, that covers a period of 12 months or less and the period ends on or before 30 June 2026, you can claim an immediate deduction.

If the expense is $1,000 or more and covers a period that extends beyond 30 June 2026, your deduction might have to be spread over 2 or more years under the prepayment rules.

For more information, see Deductions for prepaid expenses 2025.

Capital works deductions

You may be able to claim a deduction for the construction costs of your property over a 25-year or 40-year period. This is called a capital works deduction. You can claim a deduction if one of the following apply, construction began after:

• 21 August 1979, the property is used to provide short-term accommodation for travellers and it meets certain other criteria
• 19 July 1982 and the property isn't used for residential accommodation (for example, a shop)
• 17 July 1985 and the property is used for residential accommodation.

A deduction may also be available for structural improvements made to parts of the property other than the building if work began after 26 February 1992. Examples include sealed driveways, fences and retaining walls.

The deduction doesn't apply until completion of the construction. The deduction is at the rate of 2.5% or 4% (adjusted for part-year claims) depending on the date the capital works began or whether it is an eligible build to rent development.

Rental properties guide 2025 will help you determine whether you qualify, and the appropriate rate.

Rental deductions for vacant land

From 1 July 2019, you can't claim rental deductions for the cost of holding vacant land, even if you're building or intend to build a rental property.

If your rental property is destroyed by a natural disaster or circumstances beyond your control, you can still claim deductions for the cost of holding the land for 3 years from the time the property is destroyed. You may apply to the Commissioner for an extension to the 3-year limit.

Thin capitalisation

The thin capitalisation rules might apply to disallow a deduction for a portion of your debt deductions if both of the following apply:

• your debt deductions, such as interest (combined with those of your associate entities), for 2024–25 are more than $2 million
• you're either
  • a foreign resident
  • an Australian resident and you (or any associate entities) have certain overseas interests.

What you need to answer this question

You must have the correct records for the claims that you make. You'll need details of:

• all rental income you earn
• interest you're charged on money you borrow for the rental property
• other expenses relating to your rental property
• the period your property is genuinely available for rent (if applicable)
• any expenditure on capital works to your rental property.

If you have redrawn funds or increased your rental property loan for personal use, you can claim interest only on the part of the loan related to the rental property.

Completing your supplementary tax return

To complete this question, follow the steps.

Step 1

Write your share of the total amount of gross rent at question 21 – label P in your supplementary tax return. Don't show cents.

Step 2

Write your share of the interest expenses that you can claim as a deduction at question 21 – label Q. Don't show cents.

Step 3

Write your share of the capital works deductions that you can claim as a deduction at question 21 – label F. Don't show cents.

Step 4

Write your share of the other rental expenses that you can claim as a deduction (except any low-value pool deduction) at question 21 – label U. Don't show cents.

Step 5

Add up the amounts at question 21 – labels Q, F and U. Subtract the total from the amount at question 21 – label P. This is your net rent. Write this amount at question 21 – Net rent. Don't show cents.

Step 6

If your expenses are greater than your gross rent, you have made a rental loss. Print L in the Loss box at Net rent.

Check before moving to the next question

Check that you:

• show in your tax return your gross rent, interest deductions, capital works deductions, other rental deductions and net rent
• show only rental income and expenses from properties in Australia
• print L in the Loss box if your expenses are greater than your gross rent
• keep information to support your claims.

Where to go next

• Go to question 22 Life insurance companies and friendly society bonuses 2025.
• Return to main menu Individual supplementary tax return instructions 2025.
• Go back to question 20 Foreign source income and foreign assets or property 2025.