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Edited version of private ruling
Authorisation Number: 1011801431419
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Ruling
Subject: Income from overseas investment property
Question:
Are you entitled to include in your Australian tax return losses attributed to an overseas rental property?
Answer: No.
This ruling applies for the following period:
Year ended 30 June 2010
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 2009
Relevant facts
You live and work permanently in Australia.
You are a citizen of an overseas country.
You have a rental property in that overseas country.
The rental property is owned by an overseas company.
You are the sole shareholder of that company.
Relevant legislative provisions
Income tax assessment Act 1997 section 8-1
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for a loss or outgoing to the extent that it is incurred in gaining or producing assessable income but not for a loss or outgoing to the extent that it is of a capital, private or domestic nature.
Taxation Ruling TR 93/32 discusses the issue of ownership relating to rental properties.
The inclusion of expenses and losses in an individuals tax return is only available to the legal owner of the property, except in those limited circumstances where there is sufficient evidence to establish that the equitable (or beneficial) interest is different from the legal title.
A person's legal interest in a property is determined by the legal title to that property under the land law legislation in the State or Territory in which the property is situated. The legal owner of the property is recorded on the title deeds for the property issued under that legislation.
In your situation you are not the legal owner of the rental property. The company in which you are the sole shareholder is the legal owner as they appear on the title deed.
Deductions and losses associated with the rental property can only be included in the company's tax return as the company owns the rental property.
Consequently you are not entitled to include expenses and losses associated with the rental property in your Australian tax return.