Renting Out? Here’s How to Claim Maximum Tax Deductions

Are you considering renting out a room or part of your home in Australia? Whether you’re participating in the sharing economy with platforms like Airbnb or leasing out a spare room, understanding the tax implications is crucial. Here’s a comprehensive breakdown to help you navigate the process while optimising your tax benefits.

Understanding Your Tax Obligations

When you rent out part or all of your home, there are essential steps to follow for tax purposes:

1. Keep Detailed Records of Rental Income: It’s vital to record all rental income, including fees, insurance payouts, bonds, and booking fees. These details ensure accurate reporting and compliance with tax regulations.

2. Track Deductible Expenses: Maintaining records of expenses eligible for deductions is key. These can significantly reduce your taxable income and include council rates, mortgage interest, utilities, insurance premiums, maintenance costs, and platform fees.

3. Calculate Capital Gains: When you sell your property, calculate your capital gain or loss by comparing the sale price with the original purchase price, adjusted for improvements and deductions claimed.

Income You Must Declare

For tax purposes, declare all rental-related income, such as:

• Rental fees before deductions

• Insurance payouts related to renting

• Bonds or security deposits retained

• Letting and booking fees, including cancellations

Claimable Deductions

Maximise your deductions by claiming expenses directly related to renting out your property:

• Council Rates and Property Taxes: These are taxes paid to local authorities.

• Mortgage Interest Payments: Deduct the interest portion of your mortgage or home loan.

• Utility Costs: Include electricity, gas, and water bills for the rented space.

• Property Insurance Premiums: Premiums paid to insure your property.

• Maintenance and Cleaning Costs: Expenses for upkeep and repairs.

• Platform Fees: Fees charged by sharing platforms like Airbnb.

• Other Directly Related Expenses: Any additional costs directly linked to renting out your property.

Calculating Deductions

To determine the percentage of expenses you can claim:

• For the rented room: Calculate based on the room’s size and the days rented.

• For common areas: Allocate based on the shared space and days rented.

Consultation and Compliance

Maintain accurate records and seek advice from tax professionals such as Aero Accounting Group, who specialise in Australian laws to ensure compliance and maximise your tax deductions effectively.

Optimise Your Tax Strategy Today

Renting out your home can be financially rewarding, but understanding and managing your tax obligations is crucial. By following these guidelines and seeking professional advice, you can navigate the process confidently while maximising your tax benefits.

Ready to optimise your tax strategy? Contact Aero Accounting Group today for personalised assistance and start maximising your rental income deductions!