| Disclaimer This edited version will be removed from the Database after 30 September 2025. If you believe the issues detailed in this edited version warrant retention in an alternative form, email publicguidance@ato.gov.au This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of private ruling
Authorisation Number: 1011557430191
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
Subject: Rental property income and expenses
1. Are you assessable on the rent received?
Yes.
2. Are you entitled to a deduction for your share of the property expenses?
Yes.
This ruling applies for the following period
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
1 July 2010
Relevant facts
You and some family members purchased a property as joint tenants.
The two family members live in the property.
You do not live in the property.
They intend paying you rent equal to your share of the market rate for the property and will pay for their share of the property's expenses and you pay your share of expenses.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(2)
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
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 judge held that one 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, such amount being assessable income in the hands of the recipient. The amount of rent being paid was equal to that of a fully arms length transaction.
In your case, you intend charging rent to your family members equal to your share (one third) of the commercial rate for the property. The income derived from the rent received will be assessable under section 6-5 of the ITAA 1997. Expenses incurred in deriving that income will therefore be deductible in the same proportion under section 8-1 of the ITAA 1997.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
