However, if your rental property was destroyed in the bushfires and you are currently rebuilding, you can claim the costs of holding your now vacant land for up to 3 years whilst you rebuild your rental property. So, if you are building a rental property, you cannot claim the deductions for the costs of holding the land, such as interest. However, this does not apply to land that is used in a business, or if there has been an exceptional circumstance like a fire or flood leading to the land being vacant. This also applies to land for which you may have been claiming expenses in previous years. The ATO said for the 2020 year, expenses for holding vacant land are no longer deductible for individuals intending to build a rental property on that land but the property is not yet built. Deductions for vacant land no longer available “Generally speaking, if your plans to rent a property in 2020 were the same as those for 2019, but were disrupted by COVID-19 or bushfires, you will still be able to claim the same proportion of expenses you would have been entitled to claim previously,” Ms Foat said. If owners decided to use the property for private purposes, offered the property to family or friends for free, offered the property to others in need or stopped renting the property out they cannot claim deductions in respect of those periods. The ATO said if these factors had adversely affected demand, deductions were still available provided the property was still genuinely available for rent. Short-term rentalsīushfires and the pandemic have seen the use of Airbnbs and other short-term rentals plummet.
In these circumstances, rental property owners are still able to claim interest being charged on the loan as a deduction- even if the bank defers the repayments. Many banks have moved to defer loan repayments for stressed mortgagees. Some owners may have rental insurance that covers a loss of income and the ATO said any payouts from these types of policies are assessable income and must be included in tax returns. This applies whether the reduction in rent was initiated by the tenants or the owner. While rental income may be reduced, owners will continue to incur normal expenses on their rental property and will still be able to claim these expenses in their tax return as long as the reduced rent charged is determined at arms’ length, having regard to the current market conditions. If payments by your tenants are deferred until the next financial year you do not need to include these payments until you receive them. The ATO said you should include rent as income at the time it is paid, so you only need to declare the rent you have received as income. Many tenants have received rent reductions, deferrals or waivers to get through this period.
As a result of the pandemic, the Federal and State Governments have asked landlords and renters to come to an agreement on rental payments if the renter has experienced financial hardship.
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