Property Investors – Here’s what the tax man wants you to know

The COVID-19 pandemic has placed property owners and tenants in unforeseen circumstances. Many tenants are paying reduced rent or have ceased paying because their income has been adversely affected by COVID-19. You should include rent as income at the time it is paid, so you only need to declare the rent you have received as income. If payments by your tenants are deferred until the next financial year you do not need to include these payments until you receive them.

While rental income may be reduced, owners will continue to incur normal expenses on their rental property and will still be able to claim these expenses in their tax return as long as the reduced rent charged is determined at arms’ length, having regard to the current market conditions. This applies whether the reduction in rent was initiated by the tenants or the owner. Some owners may have rental insurance that covers a loss of income. It is important to remember that any payouts from these types of policies are assessable income and must be included in tax returns. Many banks have moved to defer loan repayments for stressed mortgagees.

In these circumstances, rental property owners are still able to claim interest being charged on the loan as a deduction- even if the bank defers the repayments.