Obtaining and owning a rental property
When you obtain a rental property, it's important to start keeping records straight away. To work out your tax correctly you'll need records of who owns the property (you may co-own it with other people), the date and costs of buying it, and the ongoing rental income and expenses.
Income you must declare
You must include your rental-related income in your annual income tax return. If you lease residential accommodation, you are not liable for GST on the rent you charge
Expenses you can claim
You can claim tax deductions for many of the expenses associated with the property. Some can be claimed immediately and some are claimed over a number of years.
When you have work done to your property, take note of whether the work is a repair or an improvement. Repair costs are deductible in the year they occur, but the cost of improvements (capital costs) become part of the cost base, which is used to work out your capital gain or capital loss when you sell the property.
Selling a rental property
You may make a capital gain or capital loss when you sell (or otherwise cease to own) a rental property. You pay capital gains tax on your capital gains. If the property is new residential property, you may also be liable for GST on the sale.
Holiday apartments in commercial residential properties
If you have a holiday apartment or unit that is part of commercial residential premises, it is treated like other residential rental properties. You're not liable for GST on related income and can't claim GST credits for related purchases.
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