This guide is intended to help owners of rental properties in Australia determine:
- what rental income is assessable for tax purposes
- what expenses are allowable deductions
- what records you need to keep, and
- what you need to know when you sell your rental property.
When you own a rental property, you may also need to know about capital gains and goods and services taxes, negative gearing, pay as you go instalments and the effects of the general value shifting regime.
Many of the expenses associated with your rental property will be deductible. We explain:
- How to apportion your expenses if only part of them are tax deductible.
- What expenses are not deductible.
- When you can claim those expenses that are deductible - some you can claim in the year they occur; others must be claimed over a number of years, including decline in value of depreciating assets and capital works expenses.
New this year
The guide has been expanded this year to include a comprehensive list of assets found in residential rental properties. The assets are identified according to whether they are depreciating assets and eligible for a decline in value deduction, or may be eligible for a capital works deduction. The Commissioner's determinations of effective life for more than 150 depreciating assets are also included. Some of the determinations are new and apply only to assets acquired on or after 1 July 2004.
We have also included a summary of the principles we used to categorise these items that you may use to assess any items in your residential rental property that are not shown on the list.
Is your rental property outside Australia?
If your property is located outside Australia special rules apply to the deductibility of your rental property expenses. Question 19 in TaxPack2004 supplement contains further information on foreign source income. If you are unsure of your obligations, contact your recognised tax adviser or the Tax Office.
The examples given in this publication featuring Mr and Mrs Hitchman are based on the assumption that the Hitchmans own their rental properties as joint tenants who are not carrying on a rental property business.