Income from Property Letting
If you receive rental income or lump sum premium from a property, you have to report it in your Tax Return – Individuals (if the property is solely-owned by you) or property tax return (if the property is jointly owned or co-owned by you). Learn more about the rental income and lump sum premium which should be assessable to property tax here.
Rental Income
Rental income includes the following:
- gross rent received or receivable;
- payment for the right of use of premises under licence;
- service charges or management fees paid to the owner;
- owner's expenditure borne by the tenant, e.g. repairs and property tax paid by the tenant;
- sums previously deducted as irrecoverable rent and now recovered; and
- lump sum premium.
Lump Sum Premium
Lease Premium is Assessable
The law specifically provides that lease premium is assessable to property tax in the same way as rent.
Assessable in the Year of Commencement of Tenancy
If you have received lease premium, the amount shall be included in the assessable value of the property in the year of commencement of the lease concerned.
Spreading Over to a Maximum of 36 Months
However, if the period of the lease is not contained within any one year of assessment, you should spread the lease premium into equal monthly instalments over the period of the lease or a period of 3 years, whichever is the shorter, and include the relevant amount as rental income for the years of assessment concerned.
Example
You let your property to a trader for 24 months, with effect from 1 June 2020. You received a lease premium in the sum of $60,000 on 1 May 2020.
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You should spread the lease premium over the period of the lease on an equal monthly basis and include the relevant amount as rental income for the years of assessment concerned as follows:
| Year of Assessment | Assessable Value | |
|---|---|---|
| 2020/21 | $60,000 x 10/24 = | $25,000 |
| 2021/22 | $60,000 x 12/24 = | $30,000 |
| 2022/23 | $60,000 x 2/24 = | $ 5,000 |
| $60,000 |
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If the period of the lease is 48 months, the lease premium should be spread on an equal monthly basis over the first 36 months and the relevant amount should be included as rental income for the years of assessment concerned as follows:
| Year of Assessment | Assessable Value | |
|---|---|---|
| 2020/21 | $60,000 x 10/36 = | $16,667 |
| 2021/22 | $60,000 x 12/36 = | $20,000 |
| 2022/23 | $60,000 x 12/36 = | $20,000 |
| 2023/24 | $60,000 x 2/36 = | $ 3,333 |
| $60,000 |