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If you're a landlord, then you have certain tax obligations each year. Whether you have a portfolio of rental properties or a boarder living in your home, you're responsible for making sure you fulfil the tax obligations for the income you earn.
You have to declare the income you earn
You have to declare the rental income you earn when you complete your annual tax return (IR3), and you need to keep good records.
Our Rental income (IR3R) form makes it easier to work out the income you've earned after deducting expenses. Use a separate form for each rental property.
Depending on whether you made a profit or a loss, the net rental income earned will be either added to or deducted from your other income. That's unless you choose to rent your property for less than market value. In which case, if you make a loss (because the property expenses outweigh the income earned), you can't deduct this loss from your other income.
If you rent out a holiday home
There are different tax rules if you have a mixed-use holiday home - this is where you use the holiday home yourself, you rent it out as well, and it's unoccupied for 62 days or more.
If you have a mixed-use holiday home and you earn less than $4,000 a year from renting it out, you don't need to include this income in your annual tax return. If you choose not to declare this rental income, you won't be able to claim expenses for the holiday home either.
If you have boarders or home-stay students
If you have five boarders or more then you must complete an annual tax return.
If you have four boarders or less, and the income you earn is under the weekly standard cost that we set each year, you don't have to declare this income in your tax return. If you choose not to declare this income, you won't be able to claim expenses for any costs associated with the boarders either.
Standard cost for the year to 31 March 2014
|If you have ...||then the standard cost each week is ...|
|up to two boarders||$254 for each boarder.|
|up to four boarders||$254 each for the first two boarders.
$208 each for the third and fourth boarder.
If you have flatmates or tenants
If you have flatmates living with you or tenants living in your property, then you must include this rental income in your annual income tax return (IR3).
You can work out the expenses you can claim against your rental income in two ways:
- Record the expenses that relate to the part of the property you're renting out, and claim these against the rental income you've earned.
- Record all the expenses for your property and apportion these according to the part that is rented out. For example, if a flat takes up a quarter of your home, you can claim 25% of the house expenses.
When you own a rental property you must keep accurate records so that you can calculate the income and expenses of your rental property. These include:
- bank statements, cheque butts and deposit books
- invoices and receipts
- working papers for all calculations, including your vehicle logbook
- a list of all receipts and payments
- a list of assets with receipts showing their purchase value and date
- the rental agreement and rent book
- any loan mortgage agreement.
It's easier if you use a separate bank account for your rental activity.
You must keep your records for at least seven years, even if you no longer rent out the property. You don't need to provide these records to us, but you must have them in case we want to see them.
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