If you have invested in a rental property with an intention to earn from rent or have currently rented out your current property, you’ll need to keep your records right from the start and work out on the expenses that you can claim as deductions, and declare your earnings from rentals in your tax return. Any capital gains that you have made when selling or disposing of the property will be subject to capital gains tax (CGT) with the exception in few occasions when you rent out the home that you have been living in.
If you have any property that is not rented or available for rent, such as a holiday home, hobby farm, or another dwelling you choose not to rent
• The property is subjected 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 generate income from rent
• You are allowed to include the costs of ownership in the property’s cost base, which reduces the capital gains tax liability when you will sell it.
If you buy the property in partnership with someone, you’ll need to work out to divide the income & expenses.
• If you are making a net profit from renting your property, you can pay as you go (PAYG) installments towards your expected tax liability.
• You only declare the income you earn from the property and claim related expenses if your name is on the title deed.
• If you buy a property, the date mentioned should be the date you enter into the contract & not the settlement date. The utility is your date of purchase for capital gains tax purposes.
• Apart from buying, you can obtain property by inheriting, receiving as a prize or gift, or having it transferred to you as a result of a divorce.
Accounting for rental property is considered a form of investment rather than a business. This means that where the rental property is owned jointly, the income and expenses are divided among the co-owners according to their legal interest in the property. This is despite any written or oral agreement between co-owners. However, where partners carry on the business on the rental property, the net income or loss is divided among them according to the partnership agreement. If you want to hire an Accountant, you can get in touch with Reliable Bookkeeping Services!
A person who co-owns one or more investment properties is usually regarded as an investor rather than being engaged in a rental property business with the managing partners or co-owners. This is because of the limited scope of the business activities and the limited degree on which a co-owner actively participates in rental property activities. As investors, the co-owners have to divide the property’s income & expenses in line with their legal interest in the property.
If they own the property as:
Joint tenants – each hold an equal interest in the property.
Tenants in common – they may hold unequal interests in the property with one holding 20% interest and the other 80%.
Rental income & expenses must be attributed to each co-owner according to their legal interest in the property, even if there is an agreement between co-owners, either oral or in writing, stating otherwise.