October 24, 2017

Everything you need to know about your rental income and expense

The real estate industry in Australia is continuously growing, with more and more people exploring opportunities to enter the market and buy properties for personal use or as investments. If you own a rental property, you can deduct expenses on your tax return. In this way, you can explore various tax deductions that can help increase your tax refund and get more from the rental income. The key is to keep track of all rental property tax deductions so you can make claims properly and boost your tax refund.

There are several things to take into account when you own rental properties. Two of these are: income that you must declare and expenses that you can and cannot claim.

Income that You must Declare

An Australian property investor with properties for rent should include the full amount of rent and other forms of income related to rend in the tax return. These include:

  • Rental bond money – amount in cases when a tenant defaults on the rent or if the property needs some repair or maintenance job
  • Insurance payouts – money received as compensation for damage to rental property or loss of rent
  • Booking fees
  • Payments due to normal or recurrent activities aimed to generate profit from using the property
  • Any excessive deductions for capital allowances
  • Government rebate as a result of buying a depreciating asset
  • Reimbursement for deductible expenditure

Bear in mind that goods and services tax or GST is not applicable to rental residential properties.

Expenses that You can Claim

For the period when your property is rented or available for rent, you can claim deductions for these expenses:

  • Costs on management and maintenance
  • Expenses that are deductible over several years – these include borrowing (loan establishment fees, title search fees, preparing and filing documents for mortgage), depreciation (decline in value of assets such as appliances, etc.), and capital works (construction expenses)

Expenses that You cannot Claim

Take note that you cannot claim deductions for these expenses:

  • Utility bills that are paid by your tenant
  • Acquisition and disposal costs, including expenses on conveyancing and advertising

As an Australian property investor, make sure to keep records of all documents and receipts so it will be easier for you to determine the expenses that you can and cannot claim, as well as the rental-related income that you must declare in your tax return.

Do you have other ideas on rental income, expenses that you can claim, and investment property tax? Share your investment property advice in the comments section.

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