ATO Interpretative Decision
ATO ID 2010/193 (Withdrawn)
Income Tax
Rental property expenses: co-owner rents the propertyFOI status: may be released
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This ATO ID is withdrawn. Guidance on the issue contained in this ATO ID can be found on page 11 of the Guide to Rental Properties 2015.This document has changed over time. View its history.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Can the taxpayer's share of rental property expenses be claimed under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) against rental income received from their co-owner who lives in the property?
Decision
Yes. The taxpayer's share of expenses can be claimed under section 8-1 of the ITAA 1997 against rental income received from their co-owner who lives in the property.
Facts
The taxpayer owns a property as tenant in common with another person. The taxpayer has a legal interest in the property of 50 per cent.
The taxpayer's co-owner lives in the property.
The taxpayer does not live in the property.
The taxpayer's co-owner pays $70 per week to the taxpayer to live in the property. Commercial rent in the area is $140 per week.
Reasons for Decision
Section 8-1 of the ITAA 1997 allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature.
In Case R16 84 ATC 179; 27 CTBR (NS) Case 67, the Taxation Board of Review held that a tenant in common can lease premises from their co-tenant in common (so as to have exclusive possession) and be liable to pay the amount reserved by the lease, the amount of rent reflecting an arms-length agreement. In such a case, the rent would be assessable income in the hands of the recipient.
The taxpayer rents the property to their co-owner at a commercial rental. The rent received is assessable income under section 6-5 of the ITAA 1997.
Accordingly, the taxpayer may deduct under section 8-1 of the ITAA 1997 any losses or outgoings incurred in gaining or producing the rental income - that is, where relevant, the taxpayer's share of such losses or outgoings in relation to the property - provided the losses or outgoings are not capital or of a capital, domestic or private nature.
Date of decision: 30 November 2001Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1997
section 6-5
section 8-1
Case References:
Case R16
84 ATC 179
27 CTBR (NS) 554 Case 67
Keywords
Rental property income
Tenants in common
Rental expenses
ISSN: 1445-2782
| Date: | Version: | |
| 30 November 2001 | Original statement | |
| You are here | 15 May 2015 | Archived |