Fair Market Rent Calculator for Self-Rental Agreements
This calculator helps you determine a fair market rent for your self-rental agreement. The ATO requires rent to be at market rate to claim tax deductions.
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What percentage of your home is used for business? (e.g., 30% for a home office)
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Most people think a rent agreement only happens between a landlord and a tenant. But what if you’re both? That’s right - you can legally rent your own property to yourself. It sounds strange, but it’s not just possible - it’s smart. If you own a rental property and live in it part-time, or if you run a home-based business, setting up a formal rent agreement with yourself can protect your assets, simplify taxes, and keep your finances clear.
Why Rent to Yourself at All?
Imagine this: you own a two-bedroom apartment in Sydney. You live in one room and rent out the other. Or maybe you converted your garage into a home office and use it for your freelance design work. In both cases, you’re acting as both landlord and tenant. Without a written agreement, the ATO might see your rent payments as personal spending - not business expenses. That means you lose deductions. Worse, if you ever sell the property, you could face higher capital gains tax because you didn’t document the business use.
A self-rental agreement turns personal use into a formal business arrangement. It creates a paper trail. It shows the ATO that you’re treating your property like a business asset. And it helps you claim things like a portion of your rent, utilities, internet, and even depreciation.
What a Self-Rent Agreement Must Include
Just because you’re dealing with yourself doesn’t mean you can skip the details. A legally valid rent agreement - even between you and your own company - needs the same elements as any other lease. Here’s what to put in it:
- Full names and addresses - Use your legal name and the property’s registered address. If you’re renting through a company, list the company name and ABN.
- Property description - Be specific: "Master bedroom and ensuite, 12/45 Harbour View Drive, Bondi" - not just "my apartment."
- Rent amount and payment schedule - Set a fair market rate. Don’t pick $1 just because it’s you. Use comparable listings on Realestate.com.au to justify your number. Pay monthly, on the 1st.
- Lease term - Start date and end date. Even a 12-month term works. Renew it annually.
- Responsibilities - Who pays for water, internet, repairs? If you’re the tenant, you pay for your own utilities. If you’re the landlord, you cover structural repairs.
- Business use clause - If you’re using part of the property for work, say so: "Tenant uses the designated home office for freelance graphic design services."
- Signatures and date - Print it, sign it, and date it. Keep a copy. Digital signatures are fine if you use a trusted service like DocuSign.
Here’s a real example from a client in Marrickville: They rented 30% of their house to their Pty Ltd company at $450/month - based on square footage and utility usage. That $5,400/year became a deductible business expense. They saved over $1,600 in tax.
How to Set a Fair Market Rent
You can’t just make up a number and call it a day. The ATO looks closely at self-rental arrangements. If your rent is too low, they’ll disallow your deductions. Too high? You might trigger income tax on rent you’re paying yourself.
Use these steps:
- Search Realestate.com.au for similar properties in your suburb.
- Filter for rentals with the same number of bedrooms, similar condition, and same amenities.
- Find the median rent. If three similar units rent for $400-$500, use $450.
- Adjust for use: If you’re only renting a room, calculate based on square footage. A 15m² room in a 100m² house = 15% of total rent.
For example: Your house is worth $700/month to rent fully. You use 20% for business. Your self-rent should be $140/month. That’s your deductible amount.
What You Can Claim as a Business Owner
Once you have the agreement in place, you can claim a portion of your home expenses as business costs. The ATO allows this under the "home office expenses" rules. Here’s what’s eligible:
- Utilities - Electricity, gas, water (proportionally based on use).
- Internet and phone - Only the portion used for business. Keep records of calls or data usage.
- Depreciation - You can claim decline in value for furniture, computers, or fixtures used in your home office.
- Building insurance - A portion tied to business use.
- Property maintenance - Repairs to the rented area, like fixing a leaky tap in the home office.
Don’t claim the whole house. The ATO doesn’t allow it. Keep a logbook for 4 weeks each year showing how much time you spend working in that space. Use a simple spreadsheet: Monday to Friday, 9am-5pm = 40 hours/week. If your total house use is 168 hours/week, your business use is 24%.
Common Mistakes to Avoid
People mess this up in predictable ways. Don’t be one of them.
- Not signing anything - A verbal agreement won’t hold up. Print it. Sign it. File it.
- Paying yourself with cash - Transfer rent through your bank account. Show the transaction. No cash. No envelopes.
- Using the same account for personal and business rent - Set up a separate business account. Pay rent into it. Keep receipts.
- Changing the rent arbitrarily - If you raise it from $300 to $600 mid-year without a reason, the ATO will question it. Stick to market rates. Document changes with updated agreements.
- Forgetting to update your insurance - If you’re using part of your home for business, your home insurance might not cover it. Talk to your insurer. Get a commercial endorsement.
When This Doesn’t Work
This setup isn’t for everyone. If you’re a sole trader using your entire house as an office, you might be better off using the ATO’s fixed-rate method (67 cents per hour). No rent agreement needed. Simpler.
Also, if you’re renting your property to your own SMSF (Self-Managed Super Fund), the rules are stricter. You can’t live in it at all. That’s a different legal structure - and requires professional advice.
Self-rental agreements work best for:
- Freelancers with a dedicated workspace
- Small business owners using part of their home for client meetings
- Property investors who live in one unit of a multi-unit property
- Anyone who wants to separate personal and business finances clearly
Next Steps: How to Get Started
Here’s how to make your own self-rent agreement in under 30 minutes:
- Go to LegalVision or ATO’s website and download a free residential tenancy agreement template.
- Fill in your details as both landlord and tenant.
- Set the rent based on market data from Realestate.com.au.
- Specify the area used for business (e.g., "Room 2, 12/45 Harbour View Drive").
- Print two copies. Sign and date both.
- Keep one copy with your tax records. Give the other to your accountant.
Then, set up a monthly bank transfer from your personal account to your business account (or vice versa, depending on your structure). Label it: "Rent for home office - [Date]."
What Happens When You Sell?
If you sell the property later, the ATO will look at how you used it. If you claimed deductions for business use, part of your capital gain might be taxable. But here’s the catch: if you didn’t have a formal agreement, they might say you didn’t qualify for those deductions in the first place - and now you’re stuck paying tax on a gain you thought was exempt.
Having a signed, dated, market-rate rent agreement protects you. It proves you treated the property as a business asset - not just your home. That’s worth the 30 minutes it takes to write it.
Can I rent my own house to my company in Australia?
Yes, you can. As long as the rent is at market rate and you have a written agreement, the ATO accepts it. This lets you claim business expenses like utilities, internet, and depreciation. But you must treat it like a real landlord-tenant relationship - no cash payments, no under-the-table deals.
Do I need to pay GST on rent I pay to myself?
No, you don’t. Residential rent is generally GST-free in Australia, even if you’re renting to your own company. You also can’t claim GST on rent you pay yourself. But you can still claim the rent as a business expense for income tax purposes.
What if I change the rent amount next year?
You can adjust it annually, but you must base the new amount on current market rates. Use Realestate.com.au to find comparable rentals in your suburb. Document the change with a new signed agreement. Don’t raise it just to increase your deductions - the ATO watches for that.
Can I use this if I live in a rented apartment?
No. You can only create a self-rental agreement if you own the property. If you’re renting from someone else, you can’t legally rent it to yourself. You can still claim home office expenses under the ATO’s fixed-rate or actual-cost method, but without a landlord-tenant structure.
Do I need a lawyer to make this agreement?
Not necessarily. A simple, well-written agreement using an ATO-approved template is enough. But if you’re renting to your SMSF, or if you have multiple properties, or if you’re unsure about your business structure - get legal advice. The cost of a one-hour consultation is less than the tax penalty you could face if you get it wrong.
Setting up a rent agreement with yourself isn’t about tricking the system. It’s about being organized. It’s about protecting your money, your time, and your future. You’re not just a homeowner. You’re a business owner too. Treat your property like one.
