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  • Non-commercial rental

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    If you let a property-or part of a property-at less than normal commercial rates, this may limit the amount of deductions you can claim to the amount of rental income you earn.

    Example: Non-commercial rental

    Mr and Mrs Johnson were charging their previous Perth tenants $180 per week rent. They allowed their son, Tim, to live in the property at a nominal rent of $40 per week. Tim lived in the property for 4 weeks and, when he moved out, the Johnsons started advertising for tenants.

    Although Tim was paying rent to the Johnsons, the arrangement was not based on normal commercial rates.

    As a result, the Johnsons cannot claim a deduction for the total rental property expenses for the period Tim was living in the property. Generally, a deduction for rental property expenses up to the amount of rental income received from this type of non-commercial arrangement would be allowed.

    Assuming that during the 4 weeks of Tim's residence the Johnsons incurred rental expenses of more than $160, these deductions would be limited to $160 in total-that is, $40 × 4 weeks.

    If Tim had been living in the house rent free, the Johnsons would not have been able to claim any deductions for the time he was living in the property.

    End of example

    For more information about non-commercial rental arrangements, see Taxation Ruling IT 2167.

    Last modified: 28 Jul 2003QC 16187