Rental income tax

Question from Steven updated on 12th August 2016:

I have recently bought a home and income property as a first home owner. It has two separate dwellings on the title. I stay in one and rent out the other to help to pay my mortgage. It has a seperate power and water meter. Do I still need to pay tax for the rental income? If so, how do I pay it please? 

Our expert Mark Withers responded:

The renting of a separate flat or dwelling in a property does not constitute a "flatmate" and the income must be declared.

Typically, holding costs like rates and interest are apportioned based on an accurate calculation of the sqm of the rented dwelling as a percentage of the entire dwellings combined.

Costs like repairs would generally only be claimed if they were to the rented dwelling but then claimed in their entirety. If a repair was to the entire building, like painting the whole place for example, the apportionment using sqm would be made. If this calculation indicates a profit tax is payable, if there is a loss, conversely this is deductible and may derive a refund.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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