Property investments are assessed under both the income and assets tests. The test that results in the lower rate of support (or nil rate) will apply. Under the income test the net income (income less specified expenses) is assessable. Net income is the same as taxable income excluding capital depreciation, special building write off, construction costs and certain borrowing costs i.e. loan establishment fees.
Allowable deductions can reduce assessable income from a property to nil. Losses from one property in a portfolio cannot reduce income from other properties or other sources.
Capital gains or losses are not included in the income test.
Under the assets test the property is assessed at its Net Market Value. This is the value that would be agreed to by a willing purchaser and a willing (but not anxious) vendor. The full market value of the investment less debt used to purchase the investment, whether secured or not, but not including that secured by the principal residence is assessable as an asset. This is automatically reviewed in March and September.
The GIS recipient estimates the value of the property. The department may have the property valued by a qualified professional however if considered excessive, a review can be requested. The assessed value is indexed annually for future valuation purposes.