RBizz Corporate Accountants - Resources #Rental Property

Data-matching program for rental properties

Thu, 26 Jun 2025 12:42:38 +1000

Data-matching program for rental properties

Recently, the Australian Taxation Office announced that they are undertaking a data-matching program with property management software providers. These are the rental statements that you receive on a regular basis from your real estate agent for your rental property.

The data-matching program is going back to the 2018–19 financial year and will continue through to the 2025–26 financial year.

The main focus of this data-matching program is to:

identify and educate individuals and businesses who may not be lodging their income tax returns, not correctly reporting assessable income from a rental property, not correctly reporting associated rental deductions and not complying with capital gains tax obligations for properties used to derive rental income
gain insights to help develop and implement strategies, which may include educational or compliance activities for individuals and businesses who lease or let real property, and
promote voluntary compliance and increase community confidence in the integrity of the tax and superannuation systems.

Our focus is to ensure that you are getting the best possible tax outcome. However, if you review your past records and notice that you made an error, please let us know. In particular, look out for:

any year that you forgot to include rental income if you held more than one property
situations where the rental income declared in tax returns are not at the same proportion as the ownership documents, and
you may have claimed an outright deduction for an asset that may have needed to be claimed over multiple years.
If you have any questions about this data-matching program or would like to review your arrangements, please contact our office.

Common errors for rental property owners

Wed, 25 Jun 2025 22:46:58 +1000

Common errors for rental property owners

The ATO has published a list of common taxpayer errors found from its recent property management data matching program.

The key findings in the report were as follows:

• Instead of reporting gross rental income and claiming expenses, net rent (after expenses) is reported and the same expenses are claimed a second time

• Properties are being omitted from returns

• Where properties are owned by multiple stakeholders, only one owner reports the property – when both are required to report

• Not reporting the rental income received when purchasing an already tenanted property that the new owner intends on moving in to

• Capital works or depreciating assets being claimed as repairs and maintenance

If you have forgotten to tell us about any rent received or made mistakes with claiming expenses, we urge you to lodge an amendment as soon as possible.

Also, records are normally required to be retained for 5 years from the date on which the record was prepared or obtained, or from the time the relevant transaction or act was completed, whichever is the later.

If you wish you discuss this with us further, please do not hesitate to contact us.

Income tax concessions for build-to-rent investments

Wed, 25 Jun 2025 16:55:05 +1000

Income tax concessions for build-to-rent investments

Originally announced in the 2023 Federal Budget were measures to encourage investment and construction in the build-to-rent (BTR) sector.

Currently, a tax deduction is available on the cost of constructing of a building (eg a rental property), once the building has begun to be used for a deductible purpose. One such method to get the tax deduction is to begin renting out the newly constructed dwelling.

Draft legislation for construction projects that are build-to-rent accommodation that commence after 9 May 2023, the owners of the accommodation will be entitled to a capital works deduction of 4% per annum.

This is an increase from the current 2.5% per annum that will continue to be available for other construction projects.

Eligibility criteria

To access one or both the concessions, the BTR development must meet the following eligibility criteria:

The development consists of 50 or more residential dwellings made available for rent to the general public

All the dwellings (and common areas) in the BTR development are under a single ownership, for at least 15 years (may be sold to another single entity during this period and retain eligibility)

Dwellings in the BTR development must be offered for lease terms of at least 3 years

At least 10 percent of the dwellings are available as affordable tenancies, and
All of the dwellings must be residential premises (s 995-1 ITAA 1997), taxable Australian real property and not be commercial residential premises.

Managed investment trusts

Australian tax residents have the option to invest directly in a build-to-rent accommodation project, or indirectly through a managed investment trust.

The change in the capital works deduction will also apply to managed investment trusts, meaning that you have the option to invest whichever way you wish and still get access to the increased deduction. However, please note that eligibility criteria do apply, meaning that only bona fide build-to-rent accommodation projects will get the additional deduction.

Foreign investors in a managed investment trust that choose to commence a build-to-rent accommodation project will also benefit from a reduction in withholding tax after 1 July 2024, from 30% to 15%.

Active BTR and misuse tax

A BTR development will be active if it meets all the eligibility criteria, if a new building was initially commenced as a build-to-sell development and later converted to BTR during construction, it can still be regarded as an active BTR.

An active BTR development will cease to be active if any of the dwellings fail to meet an eligibility criterion during the compliance period of 15 years (beginning on the day when the development commenced being an active BTR).

Misuse tax

If an active BTR development ceases to be an active during the compliance period, BTR development misuse tax will be imposed to approximately neutralise the tax benefits obtained both through the reduced MIT withholding rates, and the accelerated capital works deduction.

The misuse tax is roughly equal to the accelerated depreciation and reduced MIT withholding rate benefits obtained, increased by 8%. Any misuse tax assessed by the Commissioner will not be deductible and will be subject to the general interest charge.

If you have any questions about this proposed change, and its progress through the parliamentary process, please contact our office.

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ATO expands data-matching programs for rental properties

Mon, 23 Jun 2025 12:09:42 +1000

ATO expands data-matching programs for rental properties

Rental property owners to remain under scrutiny as ATO cracks down on taxpayers who either fail to meet their lodgment obligations or misreport rental information.

The rental bond data matching program has been expanded under which the rental bond details of around 2.2 million individuals will be collected by the ATO, this comes after the property management data matching program was extended in August 2024 to include the 2025-26 financial year.

To regulate the rental sector, ATO first commenced collecting rental bond information in 2005, with data collected dating back to 1985.

THE MAIN FOCUS OF THESE DATA-MATCHING PROGRAMS IS TO:

identify and educate individuals and businesses who may not be lodging their income tax returns, not correctly reporting assessable income from a rental property, not correctly reporting associated rental deductions and not complying with capital gains tax obligations for properties used to derive rental income
gain insights to help develop and implement strategies, which may include educational or compliance activities for individuals and businesses who lease or let real property, and
promote voluntary compliance and increase community confidence in the integrity of the tax and superannuation systems.

ERRORS THAT THE ATO WILL BE ON THE LOOK-OUT FOR MAY INCLUDE:

omission of rental income if you held more than one property
situations where the rental income declared in tax returns are not at the same proportion as the ownership documents
claiming an outright deduction for an asset that may have needed to be claimed over multiple years, and
Incorrect cost base elements when calculating the rental property’s net capital gain or loss (for a capital gain event).

Our focus is to ensure your accurate and timely compliance along with the best possible tax outcome, If you think there may have been misreporting of rental information in any of your previous tax returns, we can assist you in amending those tax returns.

If you have any questions about these data-matching programs or would like to review your arrangements, please contact our office.

ATO finalises guidance on the deductibility of costs relating to holding vacant land

Fri, 29 Sep 2023 15:36:00 +1000

ATO finalises guidance on the deductibility of costs relating to holding vacant land

From 1 July 2019, s 26-102(1) of ITAA 1997 denies certain taxpayers a tax deduction for outgoings in relation to vacant land unless the land is used in a business, for gaining or producing assessable income or if another exclusion applies.

This also extends to vacant land on which there is no substantial and permanent structure in use or available for use.

The finalised Tax Ruling TR 2023/3 provides the ATO’s view on when there is a substantial structure on land or the land is used in carrying on a business, and the deductibility of expenses relating to holding such land.

Determine if the land is vacant

Substantial and permanent structure on land

If the land has a substantial and permanent structure that has an independent purpose in the context of the land on which it is located. Structures that have the purpose of increasing the utility of another structure are not considered independent.

For example, fencing, silos and sheds are substantial structures that serve an independent purpose in the context of land used in primary production, but they do not serve an independent purpose in the context of residential land and rather, increase the utility of the proposed house on that land.

Structure in use or available for use

In order to be in use or available for use, the permanent and substantial structure must also be capable of being lawfully occupied. Premises that are capable of being occupied (whether residential or commercial) will always be considered available for use unless they have been deemed unsafe to occupy by a council, relevant body or relevantly qualified professional.

Residential land under construction or substantial renovation

Residential premises that are constructed or substantially renovated while the taxpayer holds the land are disregarded as a substantial and permanent structure and therefore considered vacant land, unless they can lawfully be occupied and are (or are available to be) leased, hired or licensed.

Deductibility of expenses relating to holding vacant land

The ATO has clarified that any interest (and borrowing costs) directly relating to the costs of constructing a substantial and permanent structure on land is not a loss or outgoing related to holding land but rather the cost of holding land, and it should form part of the third element costs of owning the asset for CGT purposes.

Interest incurred after land is sold or business activity has ceased

Section 26-102 does not deny interest deductions after the sale of land if the interest was deductible (and not denied by vacant land rules) immediately before the sale.

Land in use or available for use in carrying on a business

Deductions will be allowed for holding costs of vacant land if:

    - the land is in use or available for use in carrying on a business or gaining assessable income

    - the land is leased at arm’s length to another entity, it is then used or available for use in carrying on a business

    - the land has mixed uses to the extent that the land is in use or available for use in carrying on a business.

Next steps

Commercial and residential premises may be required to prove as being capable of being occupied. This may be done by the issuance of an occupancy certificate or other local council approval.

Property developers

Property developers will generally not be affected by s 26-102(1) provided they are carrying on a business. There is no requirement for the land to be in active use in the business. Land held by a developer for future development would be considered available for use.

Where the land is held separately from the property development business, for example, by a special purpose vehicle (SPV), evaluation must be done to ascertain whether the SPV is subject to the limitation in s 26-102(1).

If the SPV is a discretionary trust, it would not be an exception under s 26-102(5).

Contact us

Reach out to our office if you have any queries in relation to this taxation ruling or if you would like to discuss further.

Tax changes for build-to-rent accommodation

Mon, 22 May 2023 16:55:00 +1000

Tax changes for build-to-rent accommodation

Announced shortly before the 2023 Federal Budget, investors in build-to-rent accommodation will benefit from an increase in allowable deductions.

For construction projects that are build-to-rent accommodation that commence after 9 May 2023, the owners of the accommodation will be entitled to a capital works deduction of 4% per annum.

This is an increase from the current 2.5% per annum that will continue to be available for other construction projects.

A build-to-rent project consists of 50 or more apartments or dwellings made available for rent to the general public. The dwellings must be retained under single ownership for at least 10 years before being able to be sold and landlords will be required to offer a lease term of at least 3 years for each dwelling.

Further consultation will take place on implementation, including any minimum proportion of dwellings being offered as affordable tenancies and the length of time dwellings must be retained under single ownership.

Managed investment trusts

Australian tax residents have the option to invest directly in a build-to-rent accommodation project, or indirectly through a managed investment trust.

Foreign investors in a managed investment trust that choose to commence a build-to-rent accommodation project will also benefit from a reduction in withholding tax after 1 July 2024, from 30% to 15%.

Construction commencement

As previously mentioned, this change will apply to new builds only. That is, construction on the build-to-rent accommodation project must have commenced after 9 May 2023.

Otherwise, the capital works deduction is available at its current rate over 40 years at 2.5% per annum.

Claiming the deduction

A capital works deduction is allowable if the capital works are used in a deductible way during the income year. That is, capital works deductions are not available until the construction of the capital works have been completed.

However, this announcement makes a proposed investment in build-to-rent accommodation more attractive as the construction costs for a newly built project can now be written off over 25 years instead of 40.

If you have any questions about this proposed change, and its progress through the parliamentary process, please contact our office.

5 Essential Tips for New Property Investors

Thu, 29 Apr 2021 10:38:46 +1000

Are you a first time property investor?

Everyone wants to achieve financial independence.

However, until you have enough income-generating assets, you are unfortunately dependent on someone else such as your employer.

Investing in properties, when done right, can provide an ongoing income stream and a cash lump sum when you decide to sell it. If you are a first time property investor, check out these five tips that can help you along your journey towards financial independence.

Treat your investment property as a business.

For your investment to work for you, you need to ensure that it is structured correctly, managed by the right people, and supported by people with the technical knowledge and experience. You also have to check its financial viability and make sure it is compliant with government rules.

Don't do it alone.

Investing in a property is a major financial decision and commitment. So make sure you understand the business and seek help from trusted advisors or financial planners.

Make the effort to educate yourself and read about market trends in newspapers or property publications, or surround yourself with those who are experts in these areas.

Research, research, research

The goal is to buy the right property, in the right location, at the right time, and at the right price to maximise your gains.

As mentioned, you need to be educated on property investment before you make big decisions. Research the market, talk with local selling agents, read property and investment reports, or visit property websites online to gain some insights.

Invest sensibly

Buying the wrong property will not deliver your desired results, so you have to be really careful. Put yourself in the shoes of your target renters and ensure that your property meets their specific needs.

Cashflow is vital

Don't overcommit financially-- choose an investment property that you can afford to own, manage, and maintain.

Decide how much of your money can you commit upfront and on an ongoing basis. A professional advisor can help you come up with an accurate budget. You can also quantify the cash flow your investment will produce so you can be well-informed before you push through with it.

Getting Help From Experts

As a new property investor, it is wise to get all the advice you can get from experts to mitigate risks and maximise potential gains. If you need some help with key investment decisions and compliance matters, simply drop us a message and let us discuss what will work best for your specific situation.

Disclaimer

This article is a general guide and does not represent a specific situation or provision. Also, this is not our professional advice on specific circumstances. Please call us at 13-000-RBIZZ or write to us at team@rbizz.com.au for our professional assistance.

Tips For Buying Your First Investment Property

Sun, 25 Apr 2021 20:23:23 +1000

What you should know when buying an investment property.

There are many people who believe that when it comes to investing, nothing beats real estate. This may be true, but you still have to be smart when making your real estate investment decisions. Although investment properties can be a savvy financial move, there is plenty that can go wrong if you don’t fully understand the market, the types of investment properties, and your current financial situation.

Know your financial situation

You probably want an investment property as a way of bringing in extra money, but how much do you need and what do you want that money for? Is the investment property to fund your retirement? To create a little extra cash flow for your current lifestyle? Do you have enough assets and income to cover for the down payment? If you’re investing in residential real estate, can you afford the mortgage payments during periods no one resides in the house? Can you cover maintenance costs?

Take a hard look at your current financial situation and your goals. Will buying the income property help you reach those goals or are there better investment options, depending on your overall needs? Consider talking to a financial advisor, who can explain the options available to you and what works best based on your current situation and your goals.

Know the types of real estate investments

Typically, the first type of investment to come to mind is residential property, which can be a great investment property. Such investments are easy to understand and fairly straightforward—you buy property such as an apartment, house, or vacation home—and then rent it out, often under a lease agreement. Since there are always people who need a place to live but aren’t in a position to buy, there is always a need for rental properties.

Residential real estate isn’t the only type of investment property, however. You could look into commercial real estate—such as office space or professional units—which tends to be more stable than residential because it comes with longer leases. Retail real estate is similar to commercial, but is for retail businesses such as restaurants or consumer goods stores. Retail real estate may provide you with additional income above the rent because landlords often sign agreements with the business where the landlord receives a share of business profits. Additionally, such agreements tend to be for longer terms than residential real estate so they offer more stable income.

Other types of investment properties include vacant land, although that only provides income if you develop the land or sell it, and industrial real estate.

Understand the market

Before you invest, it’s vital that you understand the real estate market you intend to invest in. Real estate prices fluctuate and are affected by a variety of factors. A large industrial business closing can lower real estate prices drastically, just as changes to government policy can affect the value of your investment. You’ll need to understand the region you want to buy in, any anticipated changes to that area, where the real estate is the most valuable—or the most stable—and other factors that affect real estate prices in that area.

Final thoughts

Investment properties are a great way to enhance your income, but it can take a while before you start noticing changes to your bank account. The best thing you can do before investing in real estate is research. Make sure you know and understand the real estate market, the types of investment properties available to you and which work best for your needs, and what your financial situation and goals are. Doing so will help you make the best property investment decisions for you.

Get in touch with us if you’d like tailored advice for your situation.

Disclaimer

This article is a general guide and does not represent a specific tax situation or provision. Also, this is not our professional advice on specific circumstances. Please call us at 13-000-RBIZZ or write to us at team@rbizz.com.au for our professional assistance.

How To Claim Legal Expenses On Rental Properties?

Tue, 03 Nov 2020 15:16:20 +1100

Claimable and Non-Claimable Legal Expenses On Rental Properties

Legal expenses

What you can claim

You can claim the cost of the following as income tax deductions:

evicting a non-paying tenant
expenses incurred in taking court action for loss of rental income
defending a damages claim regarding injuries suffered by a third party on your rental property.

What you can't claim

You can't claim the cost of the following as income tax deductions:

solicitor's fees for the purchase of the property (these are a capital expense)
solicitor's fees for the preparation of loan documents (these can be claimed as borrowing expenses)
legal costs associated with resisting land resumption (these are a capital expense)
legal costs associated with defending your title to the property (for example, defending an action by the mortgagee to take possession of the property where you have defaulted under the loan – these are a capital expense).

Source : Australian Taxation Office

Disclaimer

How to Invest In Property Tax-Smart?

Tue, 03 Nov 2020 15:14:07 +1100

Are you tax-smart when investing in property?

Being tax-smart when investing in property

Being tax-smart when investing in property means more than making the right property choices. If you use your property to earn income at any time, you will have tax obligation and entitlements.

Here are some tips to help you get it right at each stage of the journey.

Getting record keeping right makes tax time easy

Whether you use a tax agent to prepare your tax return or do it yourself, you need to keep proper records over the period you own the property.

Keep the right records at each stage of your journey to ensure you are able to claim everything you're entitled to.

Buying

Contract of purchase
Conveyancing documents
Loan documents
Costs to buy the property
Borrowing expenses

Owning

Proof of earned rental income
All your expenses
Periods of private use by you or your friends
Periods the property is used as your main residence
Loan documents if you refinance your property
Efforts to rent the property out
Capital improvements

Selling

Contract of sale
Conveyancing documents
Sale of property fees
Calculation of capital gain/loss

Record keeping tips

Set up an easy-to-use record-keeping system as your first priority. This can be as simple as a spreadsheet or you can use professional software.

Keep records of every transaction over the period you own the property. This includes contracts of purchase and sale, as well as conveyancing and loan documentation.

Scan copies of your receipts to make it easier to store and access them.

Remember – keeping proof of all your income, expenses and efforts to rent out your property means you can claim everything you are entitled to.

Simple steps when preparing your return

Rental property owners should remember three simple steps when preparing their return.

Include all the income you receive – this includes income from short term rental arrangements (eg a holiday home), sharing part of your home, and other rental-related income such as insurance payouts and rental bond money you retain.
Get your expenses right
- Eligibility: Claim only for expenses incurred for the period your property was rented or when you were actively trying to rent the property on commercial terms.
- Timing: Some expenses must be claimed over a number of years.
- Apportionment: Apportion your claim where your property was rented out for part of the year or only part of your property was rented out, where you used the property yourself or rented it below market rates. You must also apportion in line with your ownership interest.
Keep records to prove it all – you should keep records of both income and expenses relating to your rental property, as well as purchase and sale records.

Selling a property

If you sell an investment property or your main residence that you have rented out, remember:

you may have to pay capital gains tax, even if you transfer the property into someone else’s name
a capital gain is the difference between your cost base (costs of ownership) and your capital proceeds (what you receive when you sell the property or the market value when you transfer the property)
if your costs of ownership are greater than your capital proceeds, a capital loss should be included in your return and this amount may reduce future capital gains
if you have claimed a deduction for capital works or depreciation in any income year, your cost base should not include these amounts
if you own the property for more than 12 months, you will be entitled to a 50% discount on tax on the capital gain.

For more information about how tax applies to property investing, refer to:

Source : Australian Taxation Office

Disclaimer