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Edited version of private ruling
Authorisation Number: 1011863301565
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Ruling
Subject: Rental property expenses
Question
Are you entitled to a deduction for 100% of expenses on a rental property which is jointly owned?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2009
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
The scheme commenced on
1 July 2008
Relevant facts
You and your spouse jointly own a rental property.
Your spouse does not work. Therefore, you pay for all of the expenses relating to the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Co-owners of rental property generally hold the property as joint tenants or tenants in common. The income and loss from a rental property must be shared in the proportion of ownership.
Taxation Ruling TR 93/32 states that the net income or loss 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.
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.
You are currently funding all of the outgoings of the property yourself, as your spouse does not work.
While we accept that you are paying all of the expenses relating to the property, this does not mean that the equitable interest in the dwelling is different from the legal interest. Therefore, you must include both the rental income received and outgoings spent according to your percentage of ownership as stated in the title deed of the property.