Introduction to Rental Property and Tax

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Introduction to Rental Property and Tax


Are you looking to move out of home and either rent or purchase your first property?


Buying and owning a rental property can be an exciting time. To get you started, here are some tax tips covering the basics.

Whether you use a tax agent to prepare your tax return or do it yourself, the key to making tax time easy is good record keeping. You’ll want to keep records for the period you own the property and for five years after you sell. Some of the kind of records you’ll need are contract of purchase and sale; proof of all income and expenses- for example, a statement from the real estate agent; any periods of private use by you, your family, or friends; any loan and refinancing documents, including old ones; evidence of steps you took to rent out your property, such as where you advertised, inquiries you received and responded to, and changes to rental rates.

Keeping good records helps you declare all of your income and claim everything you’re entitled to. Plus, when you sell, capital gains tax may apply, and clear record-keeping will ensure you pay the right amount of tax.

You must declare all income you receive from renting out your property, whether it is paid to you or your real estate agent. Examples of rental income for both long term and short stays include rent received, which could be either monetary or in the form of goods and services; insurance payouts, such as compensation for loss of rent or payouts for damage caused by tenants; letting or booking fees received; amounts retained from cancelled bookings; reimbursement for deductible expenditure, such as government rebates for a solar hot water system.

Also, another form of income that people often forget to include is from sharing accommodation sites. So, if you rent a room in your home or your whole home while you’re away, this is also income, and you need to declare it.

Many of the expenses associated with your rental property will be deductible, but not all of them. By keeping accurate records, you’ll be able to claim correctly at tax time.

There are three types of rental expenses– firstly, expenses you claim as an immediate deduction in your tax return. These include things like interest on your loan, property management fees, repairs, and maintenance. Secondly, expenses you can claim as a deduction over a number of years– examples include borrowing expenses, capital works or improvements, and amounts for the declining value of depreciating assets. Thirdly, expenses you can’t claim as a deduction– these include travel to inspect your property, buying or selling costs, or any expenses you have during periods of personal use of the property.

While you can’t claim a deduction for expenses related to buying and selling your rental property, these will form part of your capital gains tax calculation. To learn more about rental property and tax, Click Here

Any information relating to taxation in this document is factual only and does not constitute tax advice. We have not considered any aspect of your tax affairs. We recommend you consult your own tax professional with regards to the effect my advice will have on your tax planning needs.

Chris Connolly
Connolly Wealth Management
Level 1, 441 South Road
Bentleigh  VIC  3204

(P) 03 9591 8000
(F) 03 9530 8375

Disclosure: Christopher Connolly (280099) and Connolly Wealth Management Pty Ltd (333350) are Authorised Representatives of Wealthsure Financial Services Pty Ltd AFSL 326450.

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