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Rental property and tax

The Tax Office is reminding individuals who either own or are looking to purchase a rental property that there are essential record-keeping and taxation obligations that they must meet.

Examples of records to keep (for the period the individual owns the property for and up to five years after it is sold), include:
– Rental income
– Contract of purchase and sale
– Expenses
– Loan and refinancing documents
– Periods when the property was used for private use (i.e., family use)
– Steps taken to rent out the property (i.e., advertising)

Individuals must also declare all income they receive from renting out their property.
Examples of income may include:
– Rent received (before fees or expenses)
– Reimbursement for deductible expenditure
– Any fees collected from cancelled bookings
– Insurance payouts
– Booking or letting fees

Individuals can claim many expenses related to the property as immediate tax deductions or deductions over a number of years.

Immediate expense deductions include:
– Repairs and maintenance on the property
– Loan interest
– Property management fees

Expenses to claim as deductions over a number of tax returns include:
– Depreciating assets
– Capital works or improvements
– Borrowing expenses

Expenses accrued in buying or selling the property, using the property for personal use or travelling to inspect the property will not qualify for tax deductions.

While individuals can not claim expenses relating to buying or selling the property, these will form part of the Capital gains tax (CGT) calculations.

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News

Tax on super death benefits for dependants vs non-dependants

July 9, 2020

A super death benefit is the super paid after a person’s death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant.

Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be:

Dependants will not have to pay tax on the tax-free component of their super in the event that they:

However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:

Not all super death benefits are subject to tax; for non-dependants, there is a taxable portion. This component is largely made up of after-tax super contributions that the deceased member has made.

Super death benefit payments are subject to tax when:

Non-dependants must calculate how much money in the super account is a:

The amount of tax non-dependants pay will be based on their marginal tax rate, however, this amount may be reduced by tax offsets. For the taxed element of the taxable component, the effective tax rate is your marginal tax rate of 17% (whichever is lower). For the untaxed element of the taxable component, the effective tax rate is 32% or your marginal tax rate (whichever is lower).