Tax implications for landlords through COVID-19
Property investors may have a number of tenants that have temporarily paused their rent payments or are not paying the full amount of rent owed due to being impacted by COVID-19. Regardless of rental income changes, landlords are still entitled to claim deductions on rental property expenses if they are still incurring regular rental property expenses.
Landlords who receive a back-payment of rent, or an amount of insurance as a result of a decrease in rental income, will still need to include these amounts in their assessable income for the tax year that they receive the payment.
Additionally, landlords may be faced with deferred loan repayments as a result of COVID-19. In this case, if your loan accumulates interest it will be considered as an incurred expense, meaning that you will still be able to continue claiming a deduction on your loan interest.
It is likely that landlords of short-term rental properties have had their situation compromised by COVID-19 due to cancelled bookings and low demand. If your property is used both privately and for renting out short-term accommodation, you will be able to continue deducting property expenses in the same proportion as you were entitled to prior to COVID-19. If you had begun using the property differently in the period after your latest tax return and before COVID-19, the proportion of expenses you can claim may vary. This can include situations where:
- You have increased the amount of private use of the property by you, your family, or your friends.
- You have made the decision to permanently stop renting out your property once COVID-19 restrictions end.