What you must declare
You must declare all the income you receive for your rental property (including from overseas properties) in your tax return. These include:
- short-term rentals (for example, a holiday home)
- renting your property through a sharing platform (as examples, AirBNB, HomeAway or Flipkey)
- renting part or all of your home (for example, renting out a room)
- formal and domestic arrangements where you rent out to family and friends at less than commercial (or market) rates.
Types of rental income
Rental income can be payments you receive in cash or in the form of goods and services. You need to work out the monetary value of any payments you receive in the form of goods and services.
Rental income is payment for rent from your tenant. These are paid to either you, your agent or a property manager.
Payments relating to your rental income may include:
- bond money you retain in place of rent or keep because of damage to the property
- letting and booking fees you retain when renters or holiday makers cancel a booking
- insurance payouts, such as
- damage from a natural disaster (such as a bushfire, flood or cyclone)
- damage from an unexpected event (such as a burst sewage pipe)
- for the loss of rent
- money you receive from a relief fund in a disaster
- payments for deductible expenses, such as
- payments from a tenant to cover the cost of repairing property damage
- government rebates for buying a depreciating asset (for example, a solar hot water system)
- lump sum payments of rental income
- any assessable amounts relating to limited recourse debt arrangements involving your rental property.
For more information, see IT 2167 Income tax: rental properties – non-economic rental, holiday home, share of residence, etc. cases, family trust cases.
Rental income and completing your tax return
You must declare rent and payments relating to your rental property in your tax return:
- in the year your tenant pays rent (if your tenant pays your agent or property manager, you must declare rental income in the year your tenant pays them and not when the rental income is transferred to you)
- based on your legal ownership of the property (for example, if you own 50% of a property you must declare 50% of the rental income in your tax return).
Example: Rental income and completing you tax return
Stephanie and Patrick own a unit as joint tenants in equal shares, they have rented the property for the full year, via a property manager. The property manager takes care of routine maintenance, and deducts the expenses and property management fees from the rental income the tenant pays. The balance is then paid into Stephanie and Patrick's bank account.
The tenant gives notice that they will be moving out and directs the property manager to use their bond to pay the final month's rent. The bond is released to the property manager on 30 June 2022, but the income is not paid into Stephanie and Patrick's account until 4 July 2022.
When Stephanie and Patrick are preparing their tax return, they need to ensure they do all of the following:
- report the gross rent they earn, before it has been reduced by property management fees or any expenses paid by the property manager on their behalf
- include the final month's rent in the 2021–22 financial year, as it was received by their property manager in that financial year
- report their income and expenses 50/50 based on their legal ownership.
Where to report
Include amounts that you earn:
- in Australia at 'You had Australian interest, or other Australian income or losses from investments or property'
- from overseas property at 'Other foreign income'.
You can claim a foreign income tax offset for the tax you pay on your rental income in another country.
There are also special rules that apply to the deductibility of rental expenses that you can claim against your foreign rental income.
Watch: 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: 01:56)
Our top 10 tips will help rental property owners avoid common tax mistakes.
Check which rental income you must declare and where you should declare it in your tax return.