• Apportionment of other expenses

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    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    If you have both private and income-producing use of your property, you cannot claim a deduction for the portion of any expenditure that relates to your private use. Examples of properties where you may have both private and income-producing use are holiday homes and time share units. In cases such as these you cannot claim a deduction for any expenditure incurred for those periods when the home or unit was used by you, your relatives or your friends for private purposes.

    In some circumstances it may be easy to decide which expenditure is private in nature. For example, council rates paid for a full year would need to be apportioned on a time basis according to rental and private use where a property is used for both purposes during the year.

    In other circumstances where you are not able to specifically identify the direct cost, your expenses will need to be apportioned on a reasonable basis. For more information about situations where apportionment of expenses may be necessary, read the section Rental expenses.

    There are a number of methods of apportionment. The following examples illustrate a basis for apportionment of some other rental property related expenses.

    Example

    Renting out part of a residential property

    Michael's private residence includes a self-contained flat. The floor area of the flat is one-third of the area of the residence.

    Michael rented out the flat for 6 months in the year at $100 per week. During the rest of the year, his niece Fiona lived in the flat rent free.

    The annual mortgage interest, building insurance, rates and taxes for the whole property amounted to $9000. Using the floor area basis of apportioning these expenses, one-third-that is $3000-applies to the flat. However, as Michael used the flat to produce income for only half of the year, he can claim a deduction for only $1500-half of $3000.

    Assuming there were no other expenses, Michael would calculate the net rent from his property as:

    Gross rent

    $2600

    (26 wks x $100)

    Less expenses

    $1500

    ($3000 x 50%)

    Net rent

    $1100

     

    Example

    Apportionment of expenses where property is rented for part of the year

    Mr Hitchman's brother, Dave, owns a property in Tasmania. He rents out his property during the period 1 November 2001 to 30 March 2002-a total of 150 days. He lives alone in the house for the rest of the year. The council rates are $1000 per year. He apportions the council rates on the basis of time rented.

    Deductible expenses x portion of year = deductible amount

    He can claim a deduction against his rental income of

    $1000 x

    150
    365

    = $411

    If he had any other expenses, these too may need to be apportioned.

    Refer to the example of Apportionment of interest.

    For more information about the apportionment of expenses, see Taxation Ruling IT 2167-Income tax: rental properties-non-economic rental holiday home, share of residence, etc. cases, family trust cases and Taxation Ruling TR 97/23.

    Last modified: 18 Jul 2008QC 16578