Landlords affected by COVID-19. What do you need to know for tax?

by | May 16, 2020 | Covid-19, Property Advice

Renta Property Tax Returns affected by COVID-19

Frequently asked tax questions for rental
properties affected by COVID-19

My tenants are not paying their full rent or have temporarily stopped paying rent because their income has been adversely affected by COVID-19. Can I still claim deductions on my rental property expenses?

The simple answer is Yes 

If tenants are not meeting their payment obligations under the lease agreement due to COVID-19 and you continue to incur normal expenses on your property, then you will still be able to claim these expenses in your tax return.

I’m considering reducing the rent for tenants whose income has been adversely affected by COVID-19 to enable them to stay in the property. The tenants are not in default of their rent. Will my deduction for rental property expenses be reduced because of this?

The simple answer is No 

If you decide to reduce the rent to enable your tenants to remain in the property (thereby maximising your rental return in a changed rental market), your deduction for rental property expenses will not be reduced.

If I receive a back payment of rent or an amount of insurance for lost rent, is this amount assessable income?

The simple answer is Yes

These amounts should be declared as income in the tax year in which you receive the amounts.

If the bank defers loan repayments for a period of time as a result of COVID-19, can I continue to claim interest on the loan as a deduction?

The simple answer is Yes

If interest continues to accumulate on your loan, it will be an expense that you have incurred and is therefore deductible. Interest remains deductible on the loan even if the bank defers the repayments.

Can I access the new instant asset write-off for my property? 

The simple answer is No

If you are a property investor, you cannot access the instant asset write-off deduction.

How the instant asset write-off deduction works

COVID-19 $150,000 instant asset write-off, tips & traps blog

Short-term rental properties –
Shared Economy – Airbnb, etc

COVID-19 is adversely affecting demand, including cancellation of existing bookings, for a property that I currently rent out as short-term accommodation. I have previously had some private use of the property. Will I be able to continue to deduct expenses associated with this property in the same proportion as I was entitled to claim before COVID-19 for the period that demand is adversely affected?

The simple answer is, it depends

The amount you can claim will depend on how the property had been used before COVID-19 and how you had planned to use it during the COVID-19 period. If the reason for the adverse effect on demand for your property is because of COVID-19 (or the bushfires before this), you can continue to deduct expenses associated with your property in the same proportion as you were entitled to deduct before COVID-19.

If you had started to use the property in a different way than before COVID-19, the proportion of expenses you can claim as a deduction may change. Examples of changed use include:

  • increased private use of the property by you, your family or your friends
  • a decision to permanently stop renting out your property once the COVID-19 restrictions end.

I would like to stop paying for advertising on my short-term rental property during COVID-19 as I am not getting any queries for the property. Can I still claim deductions associated with holding the property?

The simple answer is, it depends

It depends on a wider range of factors, not just one. Whether active and bona fide efforts are made to ensure a property is available for rent is only one factor to consider when determining the appropriate method to apportion deductions for a short term rental property. You would need to consider how the property had been used before COVID-19 and how you plan to use it during the period now adversely affected by COVID-19.

During this time we acknowledge it may be a reasonable commercial decision to temporarily reduce the level of paid advertising for your property, depending on the restrictions in your property’s locality. However, this factor alone doesn’t necessarily determine the allowable proportion of your deductions.

I am using my holiday home privately for myself and my family so we can isolate during COVID-19. Can I continue to claim deductions for the property for this period, as I am unable to rent the property commercially?

The Simple answer is No

If you are using the property yourself or providing it to friends or family, this will increase your private usage of the property and reduce the deductions you can claim.

If you would like to discuss how COVID-19 may create opportunities and threats for tax planning, please contact our office.

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