Rental properties 2018 will help you, as an owner of rental property in Australia, determine:
- which rental income is assessable for tax purposes
- which expenses are allowable deductions
- which records you need to keep
- what you need to know when you sell your rental property.
Many, but not all, of the expenses associated with rental properties will be deductible. This guide explains:
- 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 tax return for the income year in which you spent the money
- others must be claimed over a number of years (including decline in value of depreciating assets and capital works expenses).
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.
When you own a rental property, you may also need to know about:
- capital gains tax (CGT)
- goods and services tax (GST)
- negative gearing
- pay as you go (PAYG) instalments.
Changes to deductions for travel expenses
From 1 July 2017, travel expenses relating to a residential rental property are generally:
- not deductible, and
- not recognised in the cost base or reduced cost base of the property for CGT purposes.
Travel expenses are the costs of travel, accommodation and meals, to inspect, maintain or collect rent for the property. For the meaning of 'residential rental property', see Definitions.
You can continue to deduct travel expenses relating to your residential rental property if:
- you are using the property in carrying on a business (including a rental property business), or
- you are an excluded entity. For the meaning of 'excluded entity', see Definitions.
For more information, see:
Changes to deductions for decline in value of second-hand depreciating assets
From 1 July 2017, there are new rules for deductions for decline in value of certain second-hand depreciating assets in your residential rental property. If you use these assets to produce rental income from your residential rental property, you cannot claim a deduction for their decline in value unless you are using the property in carrying on a business (including a rental property business), or you are an excluded entity.
This change generally applies to the depreciating assets that you:
- entered into a contract to acquire, or otherwise acquired, from 7.30 pm on 9 May 2017, or
- used, or had installed ready for use, for any private purpose in 2016–17 or earlier, for which you were not entitled to a deduction for a 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 in 2017–18).
There are no changes to the rules about deductions for decline in value of new depreciating assets in your residential rental property.
There are no changes to the rules about deductions for decline in value of depreciating assets in your residential rental property that you installed or used for a taxable purpose other than the purpose of deriving rental income.
For more information, see Limit on deductions for decline in value of second-hand depreciating assets.
Tax and natural disasters
We have special arrangements for people affected by natural disasters such as a cyclone, flood or fire occurring during the financial year. For more information see Dealing with disasters.
If your tax records were lost or destroyed, we can help you to reconstruct them, and make reasonable estimates where necessary.
Phone our emergency support team on 1800 806 218 and we can discuss the best way we can help you.
We can also:
- fast track refunds
- give you extra time to pay debts, without interest charges
- give you more time to meet activity statement, income tax and other lodgment obligations, without penalties
- help you if you are experiencing serious hardship.
Publications and services
To find out how to get a publication referred to in this guide and for information about our other services, see More information.
Is your rental property outside Australia?
If your property is located outside Australia, special rules apply to the deductibility of your rental property expenses. For more information on foreign source income, see Question 20 in the tax return instructions. If you are unsure of your obligations, contact your recognised tax adviser or us.