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Generally, you work out your tax on your net income from all sources, including your net rental income. You do this in the tax return you must fill in every year.

When you deduct your allowable rental expenses from your gross rental income you're left with taxable rental income.

The way you work out income and expenses is not the same for all residential property.

Check out tax by rental property type to see what to do for your property.

Tax by rental property type

Work out your gross rental income

Add up your gross rental income for the year

Work out your allowable rental expenses

Add up your allowable rental expenses. This amount depends on your rental property type and how it was used.

Tax by rental property type

Work out your net rental income

Deduct your allowable rental expenses from your gross rental income. The rental income you have left is what you’ll pay income tax on.

Any allowable rental expenses left after deducting your gross rental income are your excess deductions.

(If you and 1 or more people own the property, work out each owner’s share of the rental income and rental expense deductions.)

Joint property ownership and tax on rental income

Manage your excess deductions

You cannot use your excess deductions against the other income you have, such as salary or wages or business income.

You have to carry excess deductions forward from year to year and deduct them when your property makes residential income

Residential rental property deductions

Complete a Rental income - IR3R form

The IR3R form helps you work out your rental income and deductions. You’ll need one for each of your rental properties.

You can complete and send in myIR:

What happens next

Make sure you file your tax return and pay your tax within the timeframes.

It's a good idea to update any records, such as copies of forms you’ve sent us or records of excess deductions.

Your excess deduction records should match how you applied the residential property deduction rules to your property. 

Rental property records