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Edited version of your private ruling
Authorisation Number: 1012567698628
Ruling
Subject: Rental expenses
Question 1
Are you entitled to a deduction for the expenses you incur relating to the property you lease to your employer?
Answer
No.
This ruling applies for the following period:
Year ending 30 June 2014
The scheme commences on:
1 July 2013
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You purchased a residential property.
You rent the property to your employer to use as they see fit.
You charge a market rate of rent.
You incur rental expenses.
Your employer decided to provide this property as accommodation to yourself.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
Detailed reasoning
Section 8-1 of the Income Tax Assessment Act 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.
Taxation Determination TD 2004/26 discusses an arrangement under which an employee and his employer lease and leaseback the employee's private residence. The principles discussed in TD 2004/26 apply to your circumstances.
In our view, the essential character of expenses you incur in relation to your property is determined by the fact that they are paid to secure and maintain your private residence. In these circumstances, the expenditure constitutes outgoings of a private or domestic character and are not deductible.
If you lease the house you are living in to your employer, you are not entitled to deduct any of the associated expenses as the expenses are private or domestic in nature. Therefore, you are not able to claim expenses related to the house.
However where your employer leases the property from you at arm's length to provide to an unrelated third party, your losses and outgoings for that property may be claimed as a deduction as it would be considered to be a bona fide rental situation.
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