Complete this section for rental income earned and expenses incurred when you rent out your rental property located in Australia.
The way rental income and expenses are divided between co-owners varies depending on whether the co-owners are joint tenants, tenants in common or whether there is a partnership carrying on a business of letting rental properties.
Co-ownership of rental property provides more information on how to work out your share of the rent and expenses that you can claim, including:
- dividing income and expenses according to legal interest
- co-owners of an investment property (not in business)
- partners carrying on a business of letting rental properties.
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 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
- less than normal commercial rates, you limit the deductions you can claim.
Payments from a family member for board or lodgings are considered to be domestic arrangements and are not rental income You can't claim income tax deductions.
Sharing economy and tax: Renting out all or part of your home
When renting out part of or your entire home through the sharing economy, there are a number of things you need to know for tax purposes.
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.
Rental deductions for vacant land
You can no longer claim rental deductions for the cost of holding vacant land. This applies to land you held both before and from 1 July 2019.
If your rental property was destroyed by a natural disaster or circumstances beyond your control, you can still claim deductions for the cost of holding the land for 3 years from the time the property was destroyed. You may apply to the Commissioner for an extension to the 3-year limit.
Do not show at this section
Don't show the following at this section:
- a deduction for the decline in value of a low-value pool, go to Low-value pool deduction
- foreign source rental income, that is, rental income from properties outside Australia, go to Other foreign income
- expenses incurred in earning rental income from properties located outside Australia, go to Other foreign income
- income earned, or expenses incurred, from peer-to-peer sharing or your car, caravan or car parking space, go to Any other income
- capital gains or losses if you disposed of your property (for example, by selling it, gifting it or transferring it to someone else), go to Capital gains or losses
From 1 July 2021 no CGT event arises to eligible individuals on certain granny flat arrangements
The following video shows you how to include rental income and expenses in myTax.
Media: How to include rental income and expenses in myTax
https://tv.ato.gov.au/ato-tv/media?v=bd1bdiubtjsfhwExternal Link (Duration: 1:59)
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: 3:18)
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.
See simple steps when preparing your return for useful guidance on how to show your income and expenses.
To personalise your return to show Australian rental income and expenses, at Personalise return select:
- You had Australian interest, or other Australian income or losses from investments or property
- Rent (Australian properties)
To show your Australian rental income and expenses, at Prepare return select 'Add/Edit' at the Rent banner.
At the Rent banner:
Rental property details
We may pre-fill your tax return with some rental property details from your last year's tax return.
- For each rental property you own or have an interest in that
- has pre-filled, check them and add rental property details not pre-filled into the corresponding fields.
- has not pre-filled, select Add and enter rental property details into the corresponding fields.
- Property name
In the Search address field, start entering an address and select your property address from the drop-down menu.
If your rental property address is not listed in the drop-down menu, select Use entered address and enter the full rental property address in the fields provided.
- Date property first genuinely available for rent
Enter the first date that the property was genuinely available for rent
- Number of weeks property was rented this year
Enter the number of weeks the property was rented out during the income year
- Ownership percentage
Enter the percentage amount of your ownership.
If you co-own the rental property, you need to be aware of the way that rental income and expenses are divided between co-owners. Visit Co-ownership to learn more.
- For each rental property, complete the rental income fields
- Total rental income
Enter the total amount of rent payments received for the property
- Total other rental-related income
Enter the total of other rental-related income.
- Total rental income
If your ownership percentage is less than 100%, myTax will use your ownership percentage to calculate your share of the income amounts. You may alter your share of the amounts. If you do, keep a record of how you worked out your share.
MyTax will calculate Total gross rent. If your ownership percentage is less than 100%, myTax will also calculate Your share of gross rent.
- For each rental property, complete the rental expenses fields.
The Depreciation and capital allowances tool can help you work out any decline in value. It can also work out any deductible balancing adjustment when you stop holding a depreciating asset. Access this tool when you enter your rental income or expense details.
Fields from this tool can’t be adjusted in myTax. To make any adjustments or to add new assets to the tool, select the ‘Use the depreciation and capital allowances tool’ link.
If your ownership percentage is less than 100%, myTax will use your ownership percentage to calculate your share of the expense amounts. You may alter your share of the amounts. If you do, keep a record of how you worked out your share.
MyTax will calculate Total expenses. If your ownership percentage is less than 100%, myTax will also calculate Your share of total expenses.
MyTax will calculate Net rent based on the calculated amounts in Total gross rent and Total expenses. If your ownership percentage is less than 100%, myTax will also calculate Your share of net rent.
- Select Save.
- Select Save and continue when you have completed the Rent section.
Keep records of both income and expenses relating to your rental property.
The rental properties guide explains how to treat rental income and expenses. It also includes information on how to treat more than 230 residential rental property items.
In this section
Rental income is the full amount of rent and rental associated payments you earn when you rent out your property (including renting out a room). If payment is made in goods or services, you will need to work out the monetary value of these. Your gross rental income amount includes:
- rental income – rent paid to you
- rental-related income – such as
- any bond money you
- retained in place of rent
- kept because of damage to the property requiring repairs
- an insurance payout for lost rent, or a reimbursement of any rental expenses, you claimed in 2022–23 or in an earlier year
- fees retained from cancelled booking.
- any bond money you
You must declare all the income you receive for your Australian rental property in this section. Rental income you must declare includes more information, including types of rental income.
If your holiday home is rented out, you need to include the rental income you receive as income in your tax return.
You need to keep records of all rental income earned and declare it in your tax return. GST is not payable on amounts of residential rent you earn.
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 out 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 tenant. 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.
If you own a holiday home, you can only claim tax deductions for expenses to the extent the home is rented out or genuinely available for rent.
If the co-owner of the property rents the property the nature of the arrangement affects the deductibility of the expenses.
Other rental expenses information
Rental expenses are deductible to the extent that they are incurred for the purpose of producing rental income.
For information on expenses incurred prior to a property being available for rent, see expenses prior to property genuinely available for rent.
You can claim expenditure such as interest on loans, local council, water and sewerage rates, land taxes and emergency service levies you incurred during renovations to a property you intend to rent out. However, you cannot claim deductions from the time your intention changes, for example, if you decide to use the property for private purposes.
If you prepay a rental property expense, such as insurance or interest on money borrowed, that covers a period of 12 months or less and the period ends on or before 30 June 2024, you can claim an immediate deduction. A prepayment that does not meet these criteria and is $1,000 or more may have to be spread over 2 or more years.
Guide to depreciating assets
Use this guide if you bought capital assets to use in gaining or producing your assessable income and you would like to claim a deduction for the assets’ decline in value.
Always check your supplier's ABN
From 1 July 2020, if you make a payment to a contractor (such as a tradesperson) for services connected with your rental property and they don't provide you with an ABN, you may have to withhold 47% from that payment and pay it to us.
Types of rental expenses
There are 3 categories of rental expenses:
- expenses you can claim a deduction now (in the income year you incur the expense), such as interest on loans – see Rental expenses you can claim now
- expenses you can claim a deduction over several years, such as depreciation – see Rental expenses you claim over several years
- expenses you can't claim a deduction, such as costs your tenant paid, deductions unrelated to your investment property and expenses related to holding vacant land – see Rental expenses you can't claim
There are some other tax considerations you may need to know about for your rental property.
In this section
- Capital gains tax (CGT)
- Goods and services tax (GST)
- Negative gearing
- Pay as you go (PAYG) instalments
You may make a capital gain or capital loss when you sell (or otherwise cease to own) a rental property that you acquired after 19 September 1985. To learn more, visit capital gains tax.
Since 1 July 2021, provided certain conditions are met, no CGT event arises when you agree to an eligible arrangement that creates, varies or ends an eligible granny flat interest. The exemption does not apply to other CGT events:
- that happen with such transactions, and
- that do not relate to your granny flat interest's creation, variation or termination.
To learn more, visit Granny flat arrangements and CGT.
If you are registered for GST and it was payable in relation to your rental income, do not include it in the amounts you show as income in your tax return.
Similarly, if you are registered for GST and entitled to claim input tax credits for rental expenses, you do not include the input tax credits in the amounts of expenses you claim. If you are not registered for GST, or the rental income was from residential premises, you include any GST in the amounts of rental expenses you claim.
A rental property is negatively geared if it is purchased with the assistance of borrowed funds and the net rental income, after deducting other expenses, is less than the interest on the borrowings.
If you make a profit from renting your property, you will need to know about the PAYG instalments system. You will generally be required to pay PAYG instalments if you earn $4,000 or more of business or investment income, such as rental income, and the debt on your income tax assessment is more than $1,000.
Rental property owners should remember three simple steps when preparing their return:
- Include all the income you receive, including
- income from short term rental arrangements (for example, a holiday home)
- sharing part of your home
- 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.
Top 10 tips to help rental property owners avoid common tax mistakes
Whether you use a tax agent or choose to lodge your tax return yourself, avoiding these top 10 common rental property mistakes will save you time and money.