Many residential rental property owners have had their rental income affected by COVID-19. As a result, you may be wondering what you can claim this tax time.

Rental property owners can check out the ATO’s FAQs to find out answers to the following questions:

What expenses are claimable if my tenants are not paying their rent under the lease agreement due to COVID-19?  

If tenants have stopped paying their rent due to Covid-19 or bushfires you can continue to claim normal expenses that you have incurred on your property.

Will deductions for rental property expenses stay the same if the property owner reduces the rent charged?  

Yes – if you have reduced the rent to enable tenants to remain in the property your deductions for rental property expenses will not be reduced.

Must a back payment of rent or an amount of insurance received for lost rent be included as income?  

Yes – these amounts need to be declared as income in the year in which they are received.

Is a deduction on the interest charged on a rental property loan allowed if the bank defers repayments due to the COVID-19 outbreak?  

Yes – if interest continues to accumulate on your loan, it will be deductible even if you have not paid it and the bank has deferred the payments.

Is the new instant asset write-off deduction available for residential rental property assets?  

No – the instant asset write off is not available for rental properties.

 Impacts on short term rental properties

 I have previously had some private use of the property. Will I be able to continue to deduct expenses associated with this property in the same proportion as I was entitled to claim before COVID-19 for the period that demand is adversely affected?  

The amount you can claim will depend on how the property had been used before COVID-19 and    how you had planned to use it during the COVID-19 period. If the reason for the adverse effect on demand for your property is because of COVID-19 (or the bushfires before this), you can continue to deduct expenses associated with your property in the same proportion as you were entitled to deduct before COVID-19.

 If you had started to use the property in a different way than before COVID-19, the proportion of expenses you can claim as a deduction may change. Examples of changed use include:

    • increased private use of the property by you, your family or your friends
    • a decision to permanently stop renting out your property once the COVID-19 restrictions end.

I would like to stop paying for advertising on my short-term rental property during COVID-19 as I am not getting any queries for the property. Can I still claim deductions associated with holding the property?  

It depends on a wider range of factors, not just one. Whether active and bona fide efforts are made to ensure a property is available for rent is only one factor to consider when determining the appropriate method to apportion deductions for a short term rental property. You would need to consider how the property had been used before COVID-19 and how you plan to use it during the period now adversely affected by COVID-19.

During this time we acknowledge it may be a reasonable commercial decision to temporarily reduce the level of paid advertising for your property, depending on the restrictions in your property’s locality. However this factor alone doesn’t necessarily determine the allowable proportion of your deductions.

I am using my holiday home privately for myself and my family so we can isolate during COVID-19. Can I continue to claim deductions for the property for this period, as I am unable to rent the property commercially?  

No. If you are using the property yourself or providing it to friends or family, this will increase your private usage of the property and reduce the deductions you can claim.

If you have a rental property and are unsure about what deductions you can claim please contact our office on 3831 1055 to discuss your personal situation.

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