Item 9 - Rent (Trust Returns) 2025

A Rental Properties Schedule (BR) must be completed if the trust has received any rental income or expenses. The distribution statement of the rental property schedule distributes 100% of the rental income to the trust at this item and the trust distributes that income to beneficiaries at item 55.

Former STS taxpayers

If the trust is eligible and has chosen to continue using the STS accounting method, base the gross rent at label F, interest deductions at G and general deductions and repairs included at H on the STS accounting method

Small Business Entities

Depreciating assets used in rental properties are generally excluded from the small business entity depreciation rules on the basis that the assets are part of property that is subject to a depreciating asset lease. For more information, refer to the Rental properties guide and What’s new for small business on the ATO website.

If the sole reason you derived income jointly (or in common) with another person was you were a part owner of a property available for rent, but you were not in a trust carrying on a business of renting out properties, do not show any income or deductions from that rental property at this item. Show your share of the income or deductions at item 21 Rent of your Tax return for individuals (supplementary section) 2018 or the relevant items of the company, trust or fund tax return or the self-managed superannuation fund annual return.

To determine whether you are carrying on a business, refer to Taxation Ruling TR 97/11 - Income tax: am I carrying on a business of primary production? for guidance

Label F - Gross rent

Show at label F the gross amount of rental income. This item cannot be a loss.

Rental income includes:

booking or letting fees
bond moneys if the trust becomes entitled to retain them
any insurance payouts that compensate for lost or foregone rent and reimbursements from tenants of deductible expenses incurred.

If the trust is registered for GST and GST is payable in relation to rental income, exclude the GST from gross rent at label F.

Show rent from foreign sources at item 23 Other assessable foreign source income.

Show a capital gain or a capital loss made from the receipt of a Lease premium at item 21 Capital gains.

Label G - Interest deductions

If borrowed monies are used to finance a property investment, interest paid on the borrowing generally is deductible.

However, the thin capitalisation rules may apply to reduce interest deductions. These rules place a limit on the amount of interest and other borrowing costs that can be deducted for Australian tax purposes. Refer to Appendix 3 in the ATO Trust return instructions. The disallowed amount reduces the amount that would otherwise go at label G.

Show at label G the total deductible amount of interest expenses incurred in earning rental income.

Even if the TOFA rules apply to the trust, show at label G all interest incurred on money borrowed to finance a property. This includes interest from financial arrangements subject to the TOFA rules.

Refer to Guide to the taxation of financial arrangements (TOFA) rules on the ATO website.

Label X - Capital works deductions

Show at label X the total capital works deductions amount for rental buildings and structural improvements, such as fences, retaining walls and sealed drive ways only. For information on capital works deductions, refer to Appendix 5 in the ATO Trust return instructions.

Label H - Other rental deductions

Show at label H the total of other deductible expenses incurred in earning rental income.

If the trust is registered for GST and GST is payable in relation to rental income, exclude any input tax credit entitlements that arise in relation to expenses from the amount shown at label H.

Expenses listed here that are costs associated with borrowing and servicing debt may not be allowable deductions under the thin capitalisation rules. Refer to Appendix 3 in the ATO Trust return instructions. The disallowed amount reduces the amount that would otherwise go at label H.

Deductions for the decline in value of depreciating assets used to earn rental income are generally shown at label H. However, if the trust has allocated some of these assets to a low-value pool, you may need to show deductions at item 18 Other deductions. Refer to Appendix 6 in the ATO Trust return instructions.

The distribution statement of the rental property must distribute 100% of the rental income to this trust. Therefore if distribution details are entered for a return that is not in the Agent's current Tax ledger, the trust return will receive only the amount of its share in the ownership of the property.
An amount for Special building write-off or amounts for interest deductions or other deductions must not be present unless there is an amount of gross rental income. If the rental property earned no income, key a zero at rental income. If there is income but no deduction, key a zero at Sundry rental expenses.

Label Y - Build to rent capital works deduction at 4%

This is a new label in 2025.

The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024External Link and Capital Works (Build to Rent Misuse Tax) Act 2024External Link provide tax incentives to increase the supply of housing. From 1 January 2025, the incentives give owners and investors in eligible build-to-rent developments access to:

An accelerated deduction of 4% for capital works relating to build-to-rent developments
a concessional final withholding tax rate of 15% on eligible fund payments (amounts referable to rental income and capital gains from the build-to-rent development).

To be an eligible build-to-rent development that the owner can choose to be subject to the incentives, the Australian development will have:

at least 50 dwellings for rent to the public with a lease term offer of at least 5 years
at least 10% of the dwellings as affordable dwellings
a single owner.

Additionally, for the capital works deduction at the 4% depreciation rate, the construction of the build-to-rent development must have commenced after 7:30 pm AEDT on 9 May 2023.

For an eligible development to access the tax incentives, its owner must make a choice to access the incentives. The owner must notify the Commissioner of Taxation (the Commissioner) in the approved form.

All eligibility conditions must be met for a minimum period of 15 years.

If the conditions aren't met while accessing the concessions, we may issue a Build to rent development misuse tax notice of assessment to the owner of the development. We will use this new tax to clawback the incentives during the relevant period. A deduction cannot be claimed for misuse tax paid.

Trusts reflect the capital works deduction at the 4% depreciation rate by including the deduction amount for the period in the income year that the 4% rate applies at Item 9 Rent:

label X Capital works deduction
label Y Build to rent capital works deduction at 4%.