Tax-smart tips for your investment property

To access or download a copy of this information in portable document format (PDF), see Tax-smart tips for your investment property (PDF, 271KB)This link will download a file

Being tax-smart when investing in property means more than making the right property choices. If you use your property to earn income at any time, you have tax obligations and entitlements.

Getting record keeping right makes tax time easy

You need to keep proper records over the period you own the property.

Keep the right records for each stage of your journey to ensure you’re able to claim everything you’re entitled to.

Buying

• contract of purchase
• conveyancing documents
• loan documents
• costs to buy the property
• borrowing expenses

Owning

• proof of earned rental income
• all your expenses
• periods of private use by you or your friends
• periods the property is used as your main residence
• loan documents if you refinance your property
• efforts to rent the property out
• capital improvements

Selling

• contract of sale
• conveyancing documents
• sale of property fees
• calculation of capital gain or loss

Record keeping tips:

• Set up an easy-to-use record-keeping system as a priority. This can be a digital record, like a spreadsheet or you can use professional software.
• Keep records of every transaction over the period you own the property. This includes contracts of purchase and sale, as well as conveyancing and loan documentation.
• Scan copies of your receipts to make it easier to store and access them.

Remember, keeping proof of all your income, expenses and efforts to rent out your property means you can claim everything you are entitled to.

Preparing your return

Rental property owners should remember 3 simple steps when preparing their return:

1. Include all the income you receive

This includes income from short term rental arrangements (for example, a holiday home), sharing part of your home or other rental-related income such as insurance payouts and rental bond money you keep.

2. Get your expenses right

Eligibility – only claim expenses for the period your property was rented or when you were actively and genuinely trying to rent it out.

Timing – some expenses must be claimed over a number of years.

Apportionment – apportion your claims where your property was:

• rented out for part of the year
• only part of your property was rented out
• used by yourself or rented below market rates.

You must also apportion in line with your ownership interest.

3. Keep records to prove it all

You should keep records of both income and expenses relating to your rental property, as well as purchase and sale records.

Selling your property

If you sell an investment property or your main residence that you rented out, remember:

• You may have to pay capital gains tax, even if you transfer the property into someone else’s name.
• A capital gain is the difference between your cost base (cost of ownership) and your capital proceeds (what you receive when you sell the property or the market value when you transfer the property).
• If your costs of ownership are greater than your capital proceeds, a capital loss should be included in your return and this amount may reduce future capital gains.
• If you claim a deduction for capital works or depreciation in any income year, your cost base should not include these amounts.
• If you own the property for more than 12 months, and you are an Australian resident, you may be entitled to a 50% discount on tax on the capital gain.

Return to Information for investors including deductions you can claim