Rental property income and deductions

Tax time targets

For landlords, the focus is on ensuring that all income received, whether long-term, short-term, rental bonds, back payments, or insurance pay-outs, are recognised in your tax return.


If your rental property is outside of Australia, and you are an Australian resident for tax purposes, you must recognise the rental income you received in your tax return (excluding any tax you have paid overseas), unless you are classified as a temporary resident for tax purposes. You can claim expenses related to the property, although there are some special rules that need to be considered when it comes to interest deductions. For example, if you have borrowed money from an overseas lender you might be subject to withholding tax obligations.


Co-owned properties

For tax purposes, rental income and expenses need to be recognised in line with the legal ownership of the property, except in very limited circumstances where it can be shown that the equitable interest in the property is different from the legal title. The ATO will assume that where the taxpayers are related, the equitable right is the same as the legal title (unless there is evidence to suggest otherwise such as a deed of trust etc.,).


This means that if you hold a 25% legal interest in a property then you should recognise 25% of the rental income and rental expenses in your tax returns even if you pay most or all of the rental property expenses (the ATO would treat this as a private arrangement between the owners).


The main exception is where the parties have separately borrowed money to acquire their interest in the property, then they would claim their own interest deductions.


The ATO has flagged four priority areas this tax season where people are making mistakes.


With tax season upon us the Australian Taxation Office (ATO) has revealed its four areas of focus this tax season.

  1. Record-keeping

  2. Work-related expenses

  3. Rental property income and deductions, and

  4. Capital gains from crypto assets, property, and shares.

In general, there are three ‘golden rules’ when claiming tax deductions:

  1. You must have spent the money and not been reimbursed.

  2. If the expense is for a mix of work-related (income producing) and private use, you can only claim the portion that relates to how you earn your income.

  3. You need to have a record to prove it.

How to contact us

We’re available to assist you with tax planning including tax deductions. Contact Collins Hume Accountants & Business Advisers in Ballina or Byron Bay on 02 6686 3000. Read more tax planning topics here »

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