Rental Income
The following rental income must be included in your income tax return:
• gross rent paid to your or your agent
• associated payments in the form of goods or service.
• other rent related income received by you in connect with the property, such as:
(i) rental bond if retained for default of rent
(ii)insurance payout in certain circumstances
(iv) letting or booking fees
(v)Reimbursement or recoupment of deductible expenses.
Deductible expenses
Deductible expenses are divided into two types:
Immediate deductions may be available for following items
• advertising for tenants
• bank charges
• body corporate fees and charges*
• cleaning • council rates
• electricity and gas
• gardening and lawn mowing
• in-house audio/video service charges
• insurance for building contents & public liability • interest on loans* (subject to tax rules)
• land tax
• lease document expenses* for preparation, registration,stamp duty (subject to tax rules)
• legal expenses* (excluding acquisition costs andborrowing costs) (subject to tax rules)
• mortgage discharge expenses* (subject to rules)
• pest control
• property agent’s fees and commission
• quantity surveyor’s fees • some repairs and maintenance
• secretarial and bookkeeping fees • security patrol fees • servicing costs – for example, servicing a water heater
• stationery and postage
• telephone calls and rental
• tax-related expenses
• travel and car expenses*: for rent collection, inspection of property, maintenance of property (subject to rules)
• water charges. Deductions claimed over a number of years
• Borrowing cost (claim over the lesser of 5 years or term of the loan)
• Depreciation of furniture, fittings and equipment.
• Capital works deductions on the building.
Keep it in mind that expenses have to be actually incurred by you to be deductible. You cannot claim expenses paid by the tenant, such as electricity paid by your tenant.
Non-deductible expenses:
Expenses of a capital nature are not deductible, for example:
• Acquisition and disposal costs, such as stamp duty, legal cost paid to solicitor on purchase or sale; commission paid to agent on sale of the property, property valuation cost on purchase or sale, conveyance cost, and other cost incurred for the purposes of purchase or sale the property.
• Property improvements.
• Capital costs of construction or development.
Expenses of private nature are also not deductible, for example when the property is used as a holiday home.
Apportion of expenses
Sometimes expenses must be apportioned between deductible and non-deductible when:
• The property is available for rent for only part of the year, ie holiday home
• Only part of the property is used to earn rent
• The property is rented at non-commercial rates, say to family members.
Sale of a property
When you sale an investment property, the profit or loss will usually be regarded as capital gain or loss. However, if the property was sold as part of a property trading business or if the property was originally purchased to make a sell at a profit in the short term, the profit or loss will usually be regarded as income.
A capital profit made on a property acquired after 19 September 1985 will be assessed as capital gain.
When capital gain arise, discount may be available depends on the type of the property owner and the period of the property ownership.
If the rental property was sold at capital loss, you can not offset your salary and other income with the capital loss. Capital loss can only offset your other capital gain in the year, or carry forward to future years to offset future years capital gain.
GST on rental income
You are generally not required to register GST for rental income from residential property. However, if you receive more than $50,000 pa rent from commercial premises, you will need to register GST.
DisclaimerCGU Tax Website only provide general information to the public. The content of this website do not constitute any specific advice. You should consult your tax adviser for advice on specific matters. The information in the CGU Tax website is not a comprehensive guide and should not be solely relied upon as advice from CGU Tax. For more details and customised advice, you are encouraged to consult your tax adviser for advice on specific matters.
