Rental income earned and expenses incurred when you rent out your rental property located in Australia are declared at this section.
Rental property owners should remember three simple steps when preparing their return:
- Include all the income you receive
This includes income from short term rental arrangements (e.g., a holiday home), sharing part of your home, and other rental-related income such as insurance payouts and rental bond money you retain.
- Get your expenses right
- Eligibility – Claim only for expenses incurred for the period your property was rented or when you were actively trying to rent the property on commercial terms.
- Timing – Some expenses must be claimed over a number of years.
- Apportionment – Apportion your claim where your property was rented out for part of the year or only part of your property was rented out, where you used the property yourself or rented it below market rates. You must also apportion in line with your ownership interest.
- Keep records to prove it
You should keep records of both income and expenses relating to your rental property, as well as purchase and sale records.
And remember, renting property (including all or part of your own home) will usually give rise to a capital gain or loss when you sell the property – which you will need to include in your return in that year. For more information, see Capital gains or losses.
Key concepts – 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:
- retained in place of rent, or
- 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 claimed in 2018–19 or claimed in an earlier year
- fees retained from cancelled bookings.
For more information, see Rental income.
Key concepts – Rental expenses
You can claim most expenses relating to your rental property but only for the period your property was rented or genuinely available for rent, for example, advertised for rent without limiting its exposure to potential clients.
Expenses could include advertising for tenants, bank charges, body corporate fees, borrowing expenses, council rates, decline in value of depreciating assets, gardening and lawn mowing, insurance, land tax, pest control, property agent fees or commissions, repairs and maintenance, stationery, phone and water charges.
If you were 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 cannot claim the total amount of the expenses – you need to apportion the expenses. As a general guide, you should apportion expenses on a floor-area basis based on 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 the room in your home was rented to a client. You cannot claim deductions for expenses when the room is not rented.
You can claim 100% of fees or commissions charged by a sharing economy facilitator or administrator.
For more information, see Rental expenses.
Residential rental property travel expenses
Travel expenses relating to your residential rental property are not deductible unless you are carrying on a business of property investing. They cannot be included in calculations 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 will need to apportion the expenses on a fair and reasonable basis.
For more information, see Travel and car expenses.
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 acquired as part of the purchase of your property or that you subsequently purchased 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 is used. Examples of depreciating assets are freestanding furniture, stoves, washing machines and television sets.
You can use the Depreciation and capital allowances tool to work out any decline in value deduction as well as any deductible balancing adjustment when you stop holding a depreciating asset.
The tool can be accessed when you add your rental property details.
The following video shows you how to use the Depreciation and capital allowances tool.
Media:How to use the Depreciation and Capital Allowance Tool
https://tv.ato.gov.au/ato-tv/media?v=bd1bdiuboi7hkiExternal Link (Duration: 03:18)
You can watch How to use the Depreciation and capital allowance toolExternal Link in full screen on atoTV.
Limit on deductions for decline in value of second-hand depreciating assets
You cannot claim a deduction for the decline in value of certain second-hand depreciating assets you acquired, or contracted to acquire, after 7.30pm AEST on 9 May 2017 in your residential rental property unless you are carrying on a business of property investing.
For more information, see Limit on deductions for decline in value of second-hand depreciating assets.
Renting out part or all of your home
If you rented out part, or all, of your home, the rent money you received is assessable income. This means:
- you must declare the rental income in your income tax return
- you can claim deductions for associated expenses, such as part or all of the interest on your home loan
- you may not be entitled to the full main residence exemption from capital gains tax (CGT) when you sell your home.
If you rented 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.
If you rented out part, or all, of your home at less than normal commercial rates, you limit the deduction you can claim.
Payments from a family member for boarding or lodging are considered to be domestic arrangements and are not rental income. You can't claim income tax deductions.
Renting out your holiday home
If you have a holiday home that you rent out, you must include the rent money you received in your assessable income. You can also claim deductions for the associated expenses. In deducting your expenses you must ensure that you are apportioning expenses to account for any private use of the property. You can only claim expenses for periods that your holiday home was being rented or was genuinely available for rent.
Do not show the following at this section:
- A deduction for the decline in value of a low-value pool; show this at Low-value pool deduction in the Deductions section.
- Foreign source rental income, that is, rental income from properties outside Australia; show this at Other foreign income in the Foreign income, assets and entities section.
- Expenses incurred in earning rental income from properties located outside Australia; show this at Other foreign income in the Foreign income, assets and entities section.
- Income earned, or expenses incurred, from peer-to-peer sharing or your car, caravan or car parking space; show this at Any other income in the Other income section.
If you can't see these sections, use the Personalise return screen to select those sections that apply to you. For further help with personalising your return, see How to personalise your return.
You must have the right records for the claims that you make. You will need details of:
- all rental income earned
- interest charged on money you borrowed for the rental property
- other expenses relating to your rental property
- if applicable, the period your property was genuinely available for rent
- any expenditure on capital works to your rental property.
We may have pre-filled your tax return with some rental property details from your last year's tax return. Check for rental properties you own, or have an interest in, that are not pre-filled and ensure you add them.
- For each rental property that has been pre-filled in your tax return, add any rental property details not pre-filled.
- For each rental property you own or have an interest in that has not been pre-filled in your tax return, select Add and enter rental property details into the corresponding fields.
If your Ownership percentage is less than 100%, myTax will calculate your share of rental income and expenses, using your ownership percentage, and display the amount at the corresponding Your share field. For more information, see Co-ownership of rental property.
You may alter your share of the amounts. If you do, keep a record of how you worked out your share.
- Enter rental income in the corresponding fields.
- Enter rental expenses in the corresponding fields.
- Select Save.
- Select Save and continue.
Note: If you used the Depreciation and capital allowances tool, fields containing information from the tool cannot be directly adjusted in myTax. To make any adjustments to this information, or to add new assets to the tool, select the 'Use the depreciation and capital allowances tool' link.
The following video shows you how to include rental income and expenses in myTax.
Media: How to include rental income and expenses
https://tv.ato.gov.au/ato-tv/media?v=bd1bdiubtjsfhwExternal Link (Duration: 1:59)
You can watch How to include rental income and expenses in myTaxExternal Link in full screen on atoTV.