Renting Out Your Home

Posted by Michael Kirby on Jan 17, 2019 7:00:00 AM

When renting out part or all of your home, the money received is generally referred to as assessable income. This means:

  • rental income needs to be declared in your income tax return, and deductions can be claimed for any associated expenses
  • you might not be entitles to the full main residence exemption from capital gains tax (CGT), meaning you'll need to pay CGT on part of any capital gain made when the house is sold.

You aren't liable for Goods and Services Tax on the rent charged, as it doesn't apply to residential rents. However, you can't claim GST credits for any associated costs.


If you rent out either part or all of your house at the normal commercial rates, tax treatment of income and expenses is the same as any residential property. Therefore, you need to include rental income in your income tax return, and you're able to claim income tax deductions for any associated expenses, including home loan interest.

If you're only renting out part of your home, one room for instance, you're only able to claim expenses that relate to renting out that part of the home. Therefore, you can't claim for the total amount of expenses, it needs to be divided for that particular space.

As a guide, you should divide expenses on a floor-area basis, based on the area occupied solely for the renter. Then add that to a reasonable amount based on their access to any common areas of the home.

Expenses can only be claimed for the time the room was rented. If the room is used for another purpose, say as an office or for storage, during a period when no guests are staying, the ATO will likely reject deduction for expenses when the room is not used by a renter.

If rent s charged for part or all of your home at less than the normal commercial rate, for example at mates rates, the deductions you are able to claim may be limited.

*Note: payments for board from a family member are considered domestic arrangements and are not seen as rental income. Therefore, deductions can't be claimed.


Typically, you don't need to pay CGT if you sell the home you are living in (under the main residence exemption).

However, if any part of the home is used to produce income, - renting it out for example - generally, you aren't entitled to the full exemption.

In order to work out the CGT that isn't exempt, several factors need to be taken into account, which include:

  • the floor area set aside to produce income
  • the time period it was used for this purpose
  • whether or not you're eligible for what is known by the ATO as the "absence" rule (ask us about this)

We can help you work out the percentage of your capital gain that you are exempt from CGT.


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