| Disclaimer This edited version has been archived due to the length of time since original publication.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 your private ruling
Authorisation Number: 1012015127152
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. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: Property rented to parents
Question
Are you required to declare the income and claim expenses on a property rented to your parents at less than the commercial rate?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You have purchased a property with assistance from your parents where you lived with them. They agreed to pay you half the interest on the loan as rent.
As the interest rates increased, you contributed the extra and your parents continued to pay the original amount.
You have now moved out of the property and your parents continue to live there and pay the original agreed amount.
The amount they pay you is approximately half the commercial rate.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(1)
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a taxpayer includes income according to ordinary concepts.
Taxation Ruling IT 2167 examines the situation where a property is let to relatives in a non-arms length transaction. Where the rent payment received amounts to a contribution to expenses, and is not considered as a reward to the home owner but is instead a private arrangement, the rent is not considered assessable income.
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, or relate to the earning of exempt income.
In your case, you are renting your property in a non-arms length transaction. Therefore, the money you receive from your parents is not assessable. Likewise, as the expenses are not incurred in gaining or producing assessable income you are not eligible to claim any related deductions.