Rental Income
Income received from renting out a property, which must be declared as assessable income in your tax return.
Rental income is the total income you receive from tenants for the use of your investment property. It is assessable income that must be declared in your tax return. Rental income includes regular rent payments, bond money you retain (e.g., for unpaid rent or damage), letting and booking fees received, insurance payouts for lost rent, and any other payments tenants make in connection with the property.
You can claim deductions for expenses incurred in earning rental income, including mortgage interest, council and water rates, property management fees, insurance, repairs and maintenance (but not capital improvements), advertising for tenants, pest control, cleaning, gardening, and depreciation on fixtures and the building structure. The difference between rental income and allowable deductions determines whether you have a net rental profit (added to your assessable income) or a net rental loss (which can offset your other income through negative gearing).
If you own a property with others (such as a spouse), rental income and expenses must be split according to your legal ownership interest — not your loan contributions or any other arrangement. For jointly owned property (joint tenants), this is typically 50/50. For tenants in common, it's split according to the ownership percentages on the title. You cannot redirect income to a lower-earning partner to reduce tax.
How it works
Rental income is everything you receive from tenants in connection with your investment property, and all of it is assessable income that must be declared. Beyond the regular rent payments, this includes bond money you retain (for example, to cover unpaid rent or damage), letting and booking fees you receive, insurance payouts for lost rent, and any other payment a tenant makes connected to the property. It doesn't matter whether the money was spent on the mortgage, saved, or used for something unrelated — receiving or being credited with it is what triggers the obligation to declare it.
You net your rental income against the expenses of earning it — mortgage interest, council and water rates, property management fees, insurance, repairs and maintenance, advertising for tenants, pest control, cleaning, gardening, and depreciation — to work out whether you have a net rental profit or a net rental loss for the year. A profit is added to your other assessable income on your tax return; a loss can instead be offset against your other income, which is what negative gearing describes.
A common source of error is jointly owned property: income and expenses must be split according to your legal ownership interest on the title, not according to who actually made the loan repayments or any private side arrangement. For joint tenants that split is typically 50/50; for tenants in common it follows the stated ownership percentages. You cannot redirect rental income to a lower-earning co-owner to reduce the household's overall tax simply by choosing to report it that way.
Example: net rental profit for the year
A rental property earns $32,000 in rent for the year. Deductible expenses — $18,000 interest, $2,500 rates, $2,200 property management fees, $900 insurance, and $1,400 repairs — total $25,000.
The net rental profit is $32,000 − $25,000 = $7,000. That $7,000 is added to the owner's other assessable income and taxed at their marginal rate, alongside their salary or other earnings.
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Negative Gearing
When the costs of owning an investment property (interest, expenses) exceed the rental income, creating a tax-deductible loss.
Depreciation (Rental Property)
Tax deductions for the declining value of a rental property's building structure and plant & equipment (fixtures and fittings).
Capital Works Deduction
A deduction for the construction cost of a building or structural improvement, typically claimed at 2.5% per year over 40 years.
Land Tax
An annual state/territory tax on the value of land you own, excluding your principal place of residence in most states.
Capital Gains Tax (CGT)
Tax on the profit made from selling or disposing of an asset, such as property, shares, or cryptocurrency.