Property Investment and Tax

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Income Tax for Rental Income

Owners of the rental property need good tax advice. Many taxes apply during property ownership. The Goods & Services Tax and Capital Gains Tax are merely just two examples. However, there are benefits to owning a rental property that can give you many tax advantages. One of the significant benefits is a rental property depreciation schedule.

According to the Australian Taxation Office (ATO), rental money you receive from renting out a part or all of your property is considered to be an assessable taxable income. This means it's taxed at your marginal tax rate and must be declared in your income tax return.

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Rental Property Depreciation Schedule

One of the tax advantages to consider is the rental property depreciation schedule. In essence, depreciation means the Australian Tax Office gives you a break because of your property ages. As properties get older, they go down in value. This is due to natural wear and tear. Ultimately, you end up paying less in taxes because of depreciation. However, depreciation must be calculated in a specific way according to the ATO guidelines. That is why it is necessary to develop a conforming rental property depreciation schedule.

The Australian Tax Office (ATO) fixes the rates of depreciation applicable for rental and investment property. The rental home returns need to be filed in accordance with these ATO depreciation rates and must be compliant with other ATO guidelines as well. Only an ATO compliant rental property depreciation schedule should be used for filing tax returns. There have been some changes to the tax and depreciation rules in 2017, and the property owner should be aware of what depreciation allowance is permissible on each of the assets on the property. The regulations for Capital Works depreciation and Plant and Equipment depreciation, as laid down by ATO, should be followed.

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Rental Property Tax Deductions

When you are looking for financial freedom, an investment property is a tempting proposition, especially when it comes to tax benefits.

A landlord has a variety of ways to minimize their annual tax bill, and these deductions are often the difference between negative cash flow and a positive one.

It's important to note that investors can only claim deductions on their property during periods in which it was tenanted or genuinely available for rent. And they can only claim the portion of an expense that was used for business purposes and must keep records to prove these expenses.

Aside from the rental property depreciation schedule, there are also other tax deductions associated with owning rental property. For example:

  • Expenses incurred acquiring tenants
  • Third-party commissions paid to acquire tenants
  • Legal and accounting expenses
  • Mileage on vehicles driving to and from the property
  • Depreciation of items inside the park (laundry machines, furnishings, etc.)

If you own rental property, you will need to pay income tax for rental income. Calculating your tax should include all of the necessary deductions for depreciation and other allowances. Minimizing your taxes is the goal that you should strive for.

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Capital Gains Tax

Capital gains tax is another issue to consider when selling rental properties. If you sell a capital asset, such as real estate or shares, you usually make a capital gain or a capital loss. This is the difference between what it cost you to acquire the asset and what you receive when you dispose of it. You need to report capital gains and losses in your income tax return and pay tax on your capital gains. Although it's referred to as capital gains tax (CGT), this is part of your income tax, not a separate tax. Furthermore, rental property taxes can include multiple gains or losses that need to be added and subtracted to form a net gain or loss.

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Benefits of Working With Klear Picture

We offer tailored solutions for your wealth ambitions.

Klear Picture is not a traditional financial planning service.

We provide a team of experts and advisers with a broad range of expertise necessary to design your holistic plan.

Other advantages of this exciting partnership include:

  • Access to superior and current research and data that enables us to provide informed and immediate advice. They have the infrastructure to support analyses of market data from around the world sagely and quickly.
  • Importantly, their values and culture were required to match ours so that we were confident that you receive consistent, credible and consummate services and strategies.
  • Klear Picture is not aligned with any banks or Super institutions.
  • Klear Picture provides a flat fee for service as our advice is not commission driven.

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Fill in the form below or call us now on 03 9998 1940.


Contact us for accurate and current advice on your accounting and taxation requirements. We work for both you and your business.

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