Is Rental Income Taxable in Australia? What Landlords Need to Know in 2026

This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.

If you have just bought your first investment property, or you are thinking about it, one of the first questions you will probably ask is: do I pay tax on the rent I collect?

The short answer is yes. Rental income is taxable in Australia. Every dollar of rent your tenant pays you is included in your assessable income, and you pay tax on it at your marginal tax rate, just like your salary.

But that is the gross picture. Once you factor in the deductions you are entitled to claim against that income, the actual tax you owe on your rental earnings is often a lot less than you might expect. Some landlords end up paying no additional tax on their rental income at all, because their deductible expenses equal or exceed it.

Here is how it all works.

There Is No "Sales Tax" on Rent in Australia

This is a common point of confusion, especially for people who have been reading US-based property forums or websites. In the United States, some states charge sales tax on rent. In Australia, this does not happen.

Rent paid by a residential tenant in Australia is not subject to GST (Goods and Services Tax). Residential rent is specifically exempt from GST under Australian law. You do not charge your tenant GST on top of their rent, you do not register for GST just because you own a rental property, and you do not need to lodge a BAS for your rental income.

The only situation where GST applies to rent is commercial property (offices, retail, warehouses). If you own a residential rental, GST is not part of the picture.

So if you have been searching for "sales tax on rent" or "do you pay sales tax on rental property," the answer for Australian residential landlords is no. What you do pay is income tax on the rent you receive. That is a different kind of tax entirely, and it works differently.

How Rental Income Is Taxed

Rental income is treated as part of your total assessable income for the financial year. The Australian financial year runs from 1 July to 30 June.

When you lodge your tax return, you add your total rental income to your other income (salary, business income, interest, dividends, and anything else). The combined amount determines which tax bracket you fall into and what marginal rate applies.

For example, if you earn $90,000 from your job and receive $20,000 in rent during the year, your total assessable income before deductions is $110,000. You would pay tax on that total at the applicable marginal rates.

The key thing to understand is that rental income is not taxed separately or at a special rate. It is simply income. It sits alongside everything else you earn.

You report it through the rental property schedule in your tax return, either through myTax or via your registered tax agent. For a step-by-step walkthrough of this process, see our guide on how to prepare your rental property tax return.

What Counts as Rental Income

Most landlords think of rental income as the rent their tenant pays each week or fortnight. That is the biggest component, but it is not the only thing the ATO considers assessable rental income.

You need to declare all of the following:

• Rent payments. Every payment received from your tenant during the financial year. If you use a property manager, their annual statement will show this total. If you self-manage, you need to add it up from your bank records or rent tracking system.
• Bond money you keep. If a tenant moves out and you make a successful bond claim for unpaid rent or property damage, the amount you retain from the bond is assessable income in the year you receive it.
• Insurance payouts. If your landlord insurance pays out for lost rent (for example, after a tenant stops paying or a natural disaster makes the property uninhabitable), that payout is assessable income.
• Letting fees passed to the tenant. If your lease arrangement charges the tenant a letting fee or lease renewal fee, and that money comes through to you rather than going directly to an agent, it counts as rental income.
• Reimbursements from tenants. If your tenant reimburses you for something, such as the cost of a repair they caused, that amount may be assessable depending on the circumstances. Check with your accountant.

If your property was rented for only part of the year, you only declare the income for the period it was actually rented or available for rent. But you also need to apportion your deductions for the same period.

What You Can Deduct Against Rental Income

This is where things get much more favourable. The ATO allows you to claim a wide range of expenses against your rental income, and for many landlords, those deductions significantly reduce the tax owed.

The main categories include:

• Mortgage interest. The interest portion of your loan repayments (not the principal). This is usually the single largest deduction for landlords with a mortgage.
• Council rates and water charges. Fully deductible in the year you pay them.
• Insurance premiums. Landlord, building, and contents insurance.
• Repairs and maintenance. Fixing a leaky tap, repainting after a tenant moves out, replacing a broken window. These are deductible in full in the year you pay for them, as long as they restore the property to its previous condition rather than improve it.
• Property management fees. If you use a property manager, their fees are deductible.
• Advertising for tenants. Online listings, photography, signage.
• Depreciation. The decline in value of the building structure and plant and equipment items like appliances, carpets, and hot water systems. This is a non-cash deduction that can be worth thousands each year. Use the depreciation calculator to estimate what your assets might be worth in deductions.
• Body corporate or strata fees. If your property is in a managed complex.
• Accounting and legal fees. Related to your rental property.

For a full breakdown, see our complete guide to rental property tax deductions and our article on landlord expenses you can claim at tax time.

If your total deductions exceed your rental income, the resulting loss is called negative gearing, and it can be offset against your other taxable income, reducing your overall tax bill. This is why some landlords effectively pay no additional tax on their rental income despite earning rent all year.

A Quick Example

Say you collect $26,000 in rent during the financial year from your investment property in Melbourne. Your deductible expenses for the year look like this:

• Mortgage interest: $18,000
• Council rates: $1,800
• Insurance: $1,200
• Repairs: $2,500
• Depreciation: $4,000
• Other costs (advertising, strata, bank fees): $1,500

Total deductions: $29,000

Your rental income is $26,000 and your deductions are $29,000, so you have a net rental loss of $3,000. That $3,000 loss reduces your other taxable income. If your salary is $95,000, you are now taxed on $92,000 instead. You do not owe any additional tax on the $26,000 in rent. In fact, you pay less tax overall because the property is negatively geared.

Not every property works out this way. If your deductions are lower than your income, you have a net rental profit, and that profit is taxed at your marginal rate. Both outcomes are normal.

Check If Your Property Is Negatively Geared

The example above shows a negatively geared property, but your numbers will be different. Enter your own rental income, expenses, and marginal tax rate below to see whether your property runs at a net loss, and what the tax benefit looks like.

If the result shows a rental loss, that loss reduces your other taxable income for the year. If it shows a profit, that profit is added to your assessable income instead. Either way, knowing the number puts you in a much better position at tax time. You can also use the cash flow calculator to see the full before-tax picture of money in versus money out.

Record-Keeping Matters

The ATO requires you to keep records of all rental income and expenses for five years from the date you lodge the return. For capital items and purchase costs, you should keep records for the entire period you own the property plus five years after you sell it.

At a minimum, you need:

• Bank statements or rent receipts showing every payment received
• Invoices and receipts for every expense you intend to claim
• Loan statements showing interest charged
• A depreciation schedule if you are claiming depreciation
• Lease agreements confirming tenancy periods

Keeping these records organised throughout the year makes a real difference at tax time. Trying to reconstruct twelve months of transactions from memory and bank statements in October is how deductions get missed.

Tracking It All in One Place

propkt is built to handle exactly this. You log your rental income and expenses against each property as they happen, categorise them (interest, rates, repairs, insurance, and so on), and attach receipts directly to each transaction. At the end of the financial year, you generate a tax summary covering the full July-to-June period, broken down by property and category, ready to hand to your accountant or use for your own lodgement.

The result is fewer missed deductions, less time spent digging through bank statements, and a clear answer to the question every landlord should be able to answer: is this property actually making money?

Start tracking your first property for free.