SearchDo we have to pay any tax on the rent we receive?
Penny asks:
(updated on Thursday, July 03rd 2008)
Our Experts Answer:
I will assume you are going to be living in one part of the property. On that basis, the rent you receive for the other portion (the flat) will be assessable for income tax purposes. However, you will also be able to claim as expenses against the income a share of the interest, rates, insurance and so forth. For example, the flat is 25% of the total floor space. You will then be able to claim 25% of the interest, rates and insurance and any other 'shared' expenses. Where there are direct expenses for the flat such as a plumber coming in to fix a leaking tap in the bathroom, 100% of the expense can be claimed. In a situation such as this, it is also advisable to make sure that your intentions in relation to the property are well documented so it is clear for IRD should there be any questions. I would also recommend putting the property into a family trust.Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth. She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.
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