You do not deduct all your shared rental expenses when there are rooms in your rental property tenants cannot use. You split them using the floor area of the property tenants can use. We call this apportionment.
Make sure you use this method for your rental property type:
Work out the fully deductible expenses
This is what you've spent only to earn rental income, such as advertising.Rental expense deductions
Work out shared expenses
These are your total shared rental expenses for the year.
Work out the total floor area of your property
Work out the area of your property that cannot be used
This is the area of the room or rooms your tenants or guests cannot use.
For example, one room is 20m2. You use it to store private items and it's not available to guests.
Divide area available to guests or tenants by total property area
This is your shared use apportionment.
In our example, the area only guests can use is 120m2. This is total property area (140m2) minus the area guests cannot use (20m2).
You then work out the percentage you can deduct in the following way:
Divide the area guests can use by the total property area (120 divided by 140). Convert the amount to a percentage. In this example you can deduct 86% of the property's expenses.
Multiply the shared expenses by the shared use expense apportionment
Multiply your total shared expenses by the shared use apportionment. This is your shared rental expense total you can deduct.
Add your shared expenses to your fully deductible rental expenses
Add the fully deductible expenses to your total shared expenses.
This is your total rental expenses.
Add up the days your property was rented out or available to rent
This is your total income-earning use days. For example, your property is rented or available to rent 300 days in the year.
You’ll need to keep records for your property for us to see it's available for rent.
Divide your income-earning use days by days in the year
For example, 300 divided by 365. Make the result a percentage. In our example divided usage is 82%.
Multiply your divided usage by total rental expenses.
For example 82% multiplied by total rental expenses.
These are your allowable rental expenses. You can deduct them from your property's gross rental income.
After the deduction, the amount left over is what you'll pay income tax on.
What happens next
Once you've worked out your allowable rental expenses, check this pay tax on your rental income page to see what to do next: