Rental property as investment or business

If you own a rental property or holiday home, work out if your rental arrangements are for an investment or a business.

Rental property as investment or business

Common rental arrangements

Common rental arrangements include where you:

  • rent part of the property (rent out a room)

  • rent the property for part of the year

  • have a domestic arrangement with family members (meaning, you receive payment for board and lodging)

  • rent the property to your family or friends

  • rent your property consistent with normal commercial practices (arms-length arrangements).

Rental investors

Most owners are investors who are not in the business of letting rental properties, even where there is more than one investment property. This is because they:

  • have minimal involvement in rental activities (such as, interviewing potential tenants or inspecting the property)

  • still rely on income from their job.

Carrying on a business of letting rental properties

As the owner of rental properties, some of the factors that show you are carrying on a business of letting rental properties are the:

  • significant size and scale of the rental property activities

  • significant number of hours spent on the activities

  • extensive personal involvement in the activities

  • business-like manner in which the activities are planned, organised and carried on.

There are eight indicators to determine whether a business is being carried on. These are listed in paragraph 13 of TR 97/11. Although the ruling refers to primary production, these are equally relevant to non-primary production activities.

Domestic arrangements

Where you receive payment from family members in the form of ‘board and lodging’, your arrangement is of a domestic nature. This means you don’t declare the rent as income and you can’t claim expenses.

However, where you rent out your property to relatives or friends, the essential question to work out is whether the arrangements are:

  • consistent with normal commercial practices in this area

  • less than commercial rent.

If the arrangement is consistent with normal commercial practices, we treat you the same as any other owner in a comparable arms-length situation. If the property is rented out at less than commercial rent, other considerations arise and your claim for expenses may only be allowed up to the amount of rent you received.


Reproduced with the permission of the Australian Tax Office. This article was originally published on

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Authorised Representative 298494
Interprac Financial Planning Pty Ltd 

Darryl Jopling

Senior Adviser

I have worked in the financial services industry since 1982 and as a Financial Adviser since 1999.

I have worked for large Financial Planning businesses, Membership based organisations and looked after the financial planning needs of clients within an Accounting Practice before starting my own business.

I am married, have 4 older children and a grandson and I am keen golfer with mixed results like many .

I have been through many of the strategies I talk with clients about myself and with my family.

I have been through the journey of seeing my parents move into Aged care and negotiated the difficulties and pitfalls of understanding the system for them and this gives me an excellent insight into what is required to assist families at this difficult time.

In a previous roll I used to run retirement seminars looking at Centrelink and Retirement Incomes and how to make these work for you. I have helped many of my clients with Aged Care advice when their parents needed to move into Nursing Homes. For many clients I assist them with superannuation, building wealth and protecting their loved ones with insurance.

I am supported by his, Licensee, Interprac Financial Planning’s in-house resources and ongoing technical, systems and training.

I am committed to understanding your needs and identifying strategies and products to help you achieve your goals.

My guiding principle as an Adviser is to design plans which help to provide my clients with clarity of purpose and the opportunity to build a solid financial foundation.
I will take the time to listen, explain things clearly and keep you informed throughout the advice process.

My experience is complemented by professional qualifications including:

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Whether you are getting married, starting a family, embarking on the trip of a lifetime, planning to enjoy your years after work or assisting elderly parents with Aged Care and Nursing Home placements, we can help.