An investment property is a residential property that you buy only to earn you rental income. It's a property you do not use yourself, for example a holiday home.
Paying tax on your rental income
For your investment property, you’ll need to use the actual cost method to see what tax you'll pay.
Residential rental excess deductions
Sometimes your allowable rental expenses are more than your gross rental income. When this happens you're left with excess deductions. You'll have to carry these into the next tax year and deduct them when you earn residential income.
You cannot use the excess deductions against your other income, for example salary and wages.
There are rules about what you can do with excess deductions when you have more than one residential rental property.
GST and renting out investment property
Residential rental income from renting out long-term is exempt from GST. This means you do not register, file or claim GST for your rental income and expenses.
Renting out short-term is a taxable activity for GST.
If you’re not already registered for GST, you need to:
- add your short-term rental income to income from your other taxable activities
- register for GST if your total turnover is over $60,000 in a 12 month period.
If you’re renting out short-term and you're registered for GST you:
- pay GST on your short-term rental income
- claim GST on your allowable rental expenses.