Tax on self-contained unit?

Question from Raquel updated on 25th June 2014:

I have a one-bedroom, self-contained detached sleepout at the back of the property that I own and live in. I was thinking of renting it out but the price would have to include power and water (as it doesn't have its own power or water meter). It is fully furnished with TV, fridge, washing machine, benchtop oven, microwave, couch and other furniture. I have no idea how to work out or if I need to pay tax on this? I have not had any experience with rental property or taxes. Your help would be appreciated.

Our expert Mark Withers responded:

The income from the self contained unit is assessable. Deductions will be available for the costs associated with earning it. These will include interest on debt, rates, insurance, maintenance and also the power and water that are provided as part of the tenancy. An apportionment calculation will need to be made to remove the costs of the owners private and domestic living. This would normally be done by measuring the size of the unit relative to the overall size of the buildings. The furniture and chattel items that are supplied with the property can also be depreciated based on their reasonable second-hand value at the point they were made available for rental.

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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