If you invest in a rental property or rent out your current property, you’ll need to maintain records right from the start, work out what expenses you can declare as deductions, and declare all your rental-related income in your tax return.
Any capital gain you create when selling or otherwise disposing of the property will be subject to capital gains tax (CGT) apart from in some situation where you rent out the home you’ve been living in.
If you have an investment property that is not rented or offered for rent – such as a holiday home, hobby farm, or another dwelling you choose not to rent:
- the property is subject to CGT in the same way as a rental property
- you generally can’t claim income tax deductions for the costs of owning the property because it doesn’t produce rental income
- you may be able to include your costs of ownership in the property’s cost base, which would decrease any capital gains tax liability when you sell it.
When investing in a rental property, you’ll need to keep records right from the start and work out what you can and can’t claim as a deduction.
If you buy the property with someone else, you’ll also require to work out how to divide the income and expenses.
If you make net profits from renting your property, you may require to make pay as you go (PAYG) installments towards your expected tax liability.
Generally, you only declare the income you earn from a property and claim connected expenses if your name is on the title deed.
If you buy a property, the date you enter into the contract – not the settlement date – is your date of purchase for capital gains tax purposes.
Apart from buying, you can achieve a property by inheriting it, receiving it as a prize or gift, or having it transferred to you as a consequence of a marriage breakdown.