ATO Tax Tip - Rental Expenses

Please note that BreakFree Wealth is not a tax accountant and is not licenced to provide tax advice. All information within this blog has been carefully researched, however it does not replace the advice of a licenced tax professional.

Rental Expenses

The Australian Tax Office (ATO) has made it abundantly clear that not every cost spent on an investment property can be claimed as a deduction.

To begin our discussion, the first hurdle to cross relates to whether the property is genuinely available for rent. This is a very important consideration, as many investors are of the understanding that if you take a property off the market for renovations, these costs are immediately deductible in the period that the costs were incurred. As stated by the ATO "you cannot claim expenses of a capital or private nature".


Types of Rental Expenses

Rental expenses can be categorised in three broad ways, namely expenses in which you:

  1. cannot claim deductions.
  2. can claim an immediate deduction in the income year you incur the expense.
  3. can claim deductions over several income years.

1. Expenses for which you cannot claim deductions

These include:

Example 1

Source: https://www.ato.gov.au/uploadedFiles/Content/IND/Downloads/Rental-properties-2022.pdf

2. Expenses for which you can claim an immediate deduction

These include:

Please note that you can only claim for the above expenses only if actually incurred them (not paid by the tenant).

3. Expenses deductible over several income years

These include:

As stated above, the above are merely summarised examples of the various categories of expenses and further detail and understanding is required. All tax-related issues should always be made on an informed individual basis, and preferably with the guidance of a licenced tax professional.


The ATO's publication Rental Properties 2022 is an excellent publication that every property investor should access and read. You can find it here.


ATO Tax Tip - Rental Income

Please note that BreakFree Wealth is not a tax accountant and is not licenced to provide tax advice. All information within this blog has been carefully researched, however it does not replace the advice of a licenced tax professional.

Rental Related Income

The Australian Tax Office (ATO) states that rental related income "is the full amount of rent and associated payments that you receive, or become entitled to, when you rent out your property, whether it is paid to you or your agent."

Most property investors are pretty clear on what is meant by rent. However, at times the term 'associated payments' confuses investors. Often these payments are withheld from a property investor's tax return which can become a significant issue in the event of an ATO audit.

Associated payments include:


Co-Ownership of Rental Property

It is important that rental income (and expenses) for tax purposes are divided according to legal interest in the property. There are a number of ownership structures you can elect to buy property in. I refer to these in my book BreakFree Like The 1%.

For simplicity, the following options exist for property investors that choose to own a property in their individual names and are not carrying on a business of letting rental properties:

If you already own property and are not sure what your legal interest is, check the title deed.

Example 1 - Joint Tenants

Source: https://www.ato.gov.au/uploadedFiles/Content/IND/Downloads/Rental-properties-2022.pdf

Example 2 - Tenants in Common

Source: https://www.ato.gov.au/uploadedFiles/Content/IND/Downloads/Rental-properties-2022.pdf

Additionally, property investors are uncertain as to whether they are in the business of letting rental properties, particularly as their property portfolio grows in size and number. The ATO provides guidance on this, as the examples below demonstrate.

Example 3 - Not Carrying on a Business of Letting Rental Properties

Source: https://www.ato.gov.au/uploadedFiles/Content/IND/Downloads/Rental-properties-2022.pdf

Example 4 - In the Business of Letting Rental Properties

Source: https://www.ato.gov.au/uploadedFiles/Content/IND/Downloads/Rental-properties-2022.pdf

The examples above are key considerations when deciding to purchase properties in one's individual name.

As stated earlier, there are a number of different ownership options (including companies and trusts) that an experienced and competent tax accountant can assist you with. Each option has its own benefits and limitations, therefore it is a decision that should be made on an informed individual basis, under the guidance of a licenced professional.


The ATO's publication Rental Properties 2022 is an excellent publication that every property investor should access and read. You can find it here.


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