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Ruling
Subject: rental property - division of expenses between co-owners
Question
Are you entitled to claim all of your rental property expenses when your legal ownership interest in the property less than 100%?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 2012
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You and your spouse own rental properties. The legal titles of the properties apportion the ownership in unequal shares between you and your spouse. You have declared your rental income expenses according to this ownership ratio.
During the 2011-12 financial year your circumstances were such that your equitable interest was determined to be different to your legal interest.
During this period you paid all of the rental property expenses until the properties were sold.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners refers to the division of net income or loss between joint owners of a rental property. The Ruling only examines the taxation position of co-owners whose activities do not amount to the carrying on of a business. Persons who own two or three rental properties would not be considered to be carrying on a rental property business.
As you and your spouse formerly held two rental properties as co-owners you would not be considered to be carrying on a rental property business. Therefore TR 93/32 applies to your situation.
According to TR 93/32, 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.
In your case, you have demonstrated that due to your individual circumstances your equitable interest is different to your legal interest. You are therefore entitled to claim all of your rental property expenses.