RENTING out your premises is a good way to earn money – but be mindful that income generated can make you liable to taxes.
This will depend if the property you are renting out qualifies as a “business source,” says PwC International Assignment Services Sdn Bhd executive director Hilda Liow.
“A business source from property is where comprehensive maintenance and support services are provided to upkeep the residence,” she says.
Liow was one of the speakers at The Star’s StarLIVE talk, “Making Tax Less Taxing,” that was held at Menara Star on April 5.
She adds that such income is taxable regardless of how many properties an individual owns.
“In the past, you need to have up to four properties to be taxable,” she says.
Meanwhile, expenses which are allowed deduction from rental income are those directly incurred in the production of the rental income.
Examples of such expenses include assessment and quit rent, interest on loan and fire insurance premium, expenses on repair and service charges, rent collection and rent renewal.
Separately, an individual is also liable to taxes if he is generating a business income, says Liow.
“This includes partnerships, if a person is self employed, an independent consultant and deductions that are wholly and exclusively incurred in the production of gross income.
“Basically, anything that tantamounts to trade is a business income,” she says.
PwC International Assignment Services’ senior manager Lim Phing Phing, meanwhile, points out that individuals can claim tax relief from the purchase of selected items.
“Apart from books and personal computers, tax relief is also granted for the purchase of sports equipment (up to RM300), expenses for acquiring advanced education organised by the Government (RM5,000) and purchase of items needed to support one’s (disabled) self or for a disabled spouse, child or parent (RM5,000).
She says tax relief for personal computers are only allowed once every three years, adding that iPads do not qualify.
Lim adds that those who fall within the middle-income group are also allowed a “one-time” special tax relief of RM2,000.
“This only applies to resident taxpayers earning up to RM8,000 per month or an aggregate income of up to RM96,000 a year,” she said, adding that this one-time relief only applies to around 11% of the Malaysian population.
“This is only applicable for the 2013 tax assessment year. We’re not sure if it will be extended to 2014.”
StarLIVE is a monthly free event organised by The Star. Registration is on first-come first-served basis. To register, email email@example.com with your name, NRIC number, e-mail and contact number.