retaining rental bond and tax implications

[fluffyrabbit]

Hi

I am a landlord leasing an apartment in Melbourne, Vic. A few months ago I was billed for my tenant's water usage charges by mistake. The managing agent suggested that I paid the bill and she would forward the bill to the tenant and get them to refund the usage portion, which I did. However, the tenant still hasn't paid and is now moving out. So the agent has said I can claim the unpaid charges back from the rental bond. So all is good, but my question is, do I need to declare this on my tax return?

The ATO website says all amounts retained from the bond must be declared as assessable income, but in this case the amount held back is not income and is a non-deductible expense. I can only claim a deduction for the water service charges, not the water usage portion of the bill because they have been incurred by the tenant.

If I declare the amount held from the bond for the usage charges then I will pay tax for the extra amount and effectively won't be fully reimbursed for the bill.

I haven't been able to find any examples on the ATO website that fit my situation and would be grateful if anyone could shed some light on this.

Thanks in advance.

 

[Terryw]

It would be income.

But you could claim a deduction for the amount paid.

 

[fluffyrabbit]

Hi Terryw
Thanks for the reply.

I can only claim the service charges as a deduction. I've already found info regarding this on the ATO website. Any charges the tenant normally pays are non deductible and it gives electricity and water usage as examples. I can't see how it can be income if I am just being refunded for the tenants water bill unless I'm missing something.

 

[Terryw]

Sorry, don't get what you mean.

It is either an expense or a reimbursement. Either way you won't be out of pocket anymore.

 

[Mry]

Terryw is correct.

On your tax return, it should look something like

Income
Rental Bond retained $373

Expense
Water bill unreimbursed $373

Net result - $0.

Many landlords pay for the water expenses up here in Queensland on behalf of their tenants regardless of usage. The fact the tenant drove the expense does not make it non-deductible. If so, when a tenant smashes your house up and does a runner, that would make the repair bill non-deductible because they caused the damage.

 

[jaycee]

Hi

I am a landlord leasing an apartment in Melbourne, Vic. A few months ago I was billed for my tenant's water usage charges by mistake. The managing agent suggested that I paid the bill and she would forward the bill to the tenant and get them to refund the usage portion, which I did. However, the tenant still hasn't paid and is now moving out. So the agent has said I can claim the unpaid charges back from the rental bond. So all is good, but my question is, do I need to declare this on my tax return?

The ATO website says all amounts retained from the bond must be declared as assessable income, but in this case the amount held back is not income and is a non-deductible expense. I can only claim a deduction for the water service charges, not the water usage portion of the bill because they have been incurred by the tenant.

If I declare the amount held from the bond for the usage charges then I will pay tax for the extra amount and effectively won't be fully reimbursed for the bill.

I haven't been able to find any examples on the ATO website that fit my situation and would be grateful if anyone could shed some light on this.

Thanks in advance.

How much of the bond is for water usage ?

 

[fluffyrabbit]

Thanks for all your replies.
The amount held back from the bond will be $215 and this is only for 4 weeks usage for one person, so who knows what shes being doing.
Anyway I think I might have misinterpretted the rules. I was under the impression that any bill the tenant is normally responsible for can't be deducted.

Here in Vic the landlord normally pays the service charges and the tenant has a separate account with the water company for the usage charges, so I was viewing them as separate things.

Thanks again for clarifying things. I'm still new to this landlord thing.