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Non-commercial rental

Last updated 3 December 2005

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.

Example: Non-commercial rental

Mr and Mrs Hitchman were charging their previous Queensland tenants the normal commercial rate of rent – $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 four weeks. When he moved out, the Hitchmans advertised for tenants.

Although Tim was paying rent to the Hitchmans, the arrangement was not based on normal commercial rates. As a result, the Hitchmans cannot claim a deduction for the total rental property expenses for the period Tim was living in the property. Generally, a deduction can be claimed for rental property expenses up to the amount of rental income received from this type of non-commercial arrangement.

Assuming that during the four weeks of Tim's residence the Hitchmans 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 Hitchmans 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 referred to above.