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Edited version of your private ruling
Authorisation Number: 1012557474785
Ruling
Subject: Rental property-Ownership
Question
Can you claim 100% of the expenses for a jointly owned rental property?
Answer
No
This ruling applies for the following period
Year ended 30 June 2013
Year ending 30 June 2014
The scheme commenced on
1 July 2012
Relevant facts
You purchased a property with your (then) partner.
The title for this property is held jointly.
You have subsequently separated from your partner.
Your ex-partner has stopped contributing towards repayments and related expenses for the property.
You decided to rent the property as you could not afford to hold the property otherwise.
The rental contract is in your name only.
All rental income is being collected by you and you are paying all expenses relating to the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Taxation Ruling TR 93/32 explains that the net loss or income from a rental property must be shared according to the legal interest of the owners, except in those very limited circumstances where there is sufficient evidence to establish that the equitable interest is different from the legal title. An example of where the equitable interest may differ from the legal interest is when an owner is holding their share as trustee for the other owner. A Family Court order dealing with settlement of jointly owned property may also alter this equitable interest.
A person's legal interest in a property is determined by the legal title to that property under the land legislation in the State or Territory in which the property is situated. The legal owner of the property is recorded on the title deed for the property issued under that legislation.
Rental income and expenses must be attributed to each co-owner according to their legal interest in the property, despite any agreement between the co-owners, either oral or in writing stating otherwise.
Where a co-owner forgoes their share of the rental income and/or pays for all the expenses this is considered to be a private arrangement between the co-owners. It does not alter the fact that they are legally entitled to their share of the income and liable for their share of the expenses.
While we can appreciate your circumstances, the Commissioner does not have any discretion under the tax law to allow a taxpayer to claim more or less than their legal entitlement to investment property income and expenses.
Therefore, you must declare the income and claim the deductions with respect to the property in proportion with your legal interest in the property.
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