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9 Rent

Last updated 11 February 2019

Former STS taxpayers still using the STS accounting method

If the partnership 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 – for more information, see continued use of the STS accounting method.

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. For more information, see the Concessions for small business entities (NAT 71874).

If the sole reason you derived income jointly (or in common) with another person was you were a part owner of a property available for rent, but you were not in a partnership 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) 2013 or the relevant items of the company, trust or fund tax return or the self-managed superannuation fund annual return.

To determine whether you are carrying on a business, see TR 97/11 - Income tax: am I carrying on a business of primary production?

Income tests require each partner to report their share of the partnership rental property income or loss. If the rental income is merely investment income and not partnership business income, this should be reported in your individual income tax return at item 21 for rental income or losses. If your rental income is true partnership business income, you are required to complete item 9, and show your net rental property income or loss at H item 50 and your share of net rental property income or loss at K item 51 – see item 50 Income tests for more information.

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 partnership 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 partnership is registered for GST, and GST is payable for 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 on each partner’s own tax return.

For more information about CGT events involving leases, see the Guide to capital gains tax 2012–13.

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.

Even if the TOFA rules apply to the partnership, show at G all interest expense incurred on monies borrowed to finance a property – this includes interest expense from financial arrangements subject to the TOFA rules.

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

If what you show at G includes an amount which is brought to account under the TOFA rules, also complete item 31 Taxation of financial arrangements (TOFA).

For more information, see the Guide to the taxation of financial arrangements (TOFA) rules.

Capital works deductions

Show at X the total capital works deductions amount for rental buildings only – 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 partnership is registered for GST, and GST is payable for rental income, exclude any input tax credit entitlements that arise for 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 – for more information, 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 partnership has allocated some of these assets to a low-value pool, you may need to show deductions at 18 Other deductions – for more information, 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. For more information, see Rental properties 2012–13 (NAT 1729).

Tax agents who lodge partnership tax returns through ELS must complete the Rental property schedule 2013 if item 9 Rent is completed. You do not have to complete the schedule if you are lodging a paper version of the partnership tax return.