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This edited version has been archived due to the length of time since original publication.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: 1012493073388

Ruling

Subject: Rental income

Question

Is the rental income, that you have not received, included as assessable income?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2013

The scheme commences on:

1 July 2012

Relevant facts and circumstances

You are an Australian resident for tax purposes.

As a gift your relation transferred an overseas property to you.

The property has been rented for several years on a commercial basis.

After the transfer of the property to you, you altered the payment arrangements on the tenancy agreement and requested the monthly rental payments to be paid to your solicitor.

Since the transfer neither your solicitor or you or your relation have received any rent.

Prior to the transfer, the tenant has occasionally given some of the rental income to your sibling overseas. Your sibling would then pay the rates on the property.

Your sibling is disputing the transfer of the property.

The matter has been referred to your lawyer overseas.

Your lawyers have received a sealed judgement against the tenant for eviction and recovery of rental. You have not received any income.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Rent is regarded as ordinary income and therefore assessable under subsection 6-5(2) of the ITAA 1997.

If an amount would be ordinary income apart from the fact that you have not received it, it becomes assessable income as soon as it is applied or dealt with in any way on your behalf or as you direct (subsection 6-5(4) of the ITAA 1997).

In your case, the rental income has not been applied or dealt with in any way on your behalf or as you directed. Therefore the rental income is not assessable under subsection 6-5(4) of the ITAA 1997.

Taxation Ruling TR 98/1 sets out the Commissioner's policy on the derivation of income.

Paragraph 48 of TR 98/1 states that rent is generally assessable when received or applied at your direction. That is, rent is assessable on receipt even though it may relate to a past or future income period.

In your case, you have not received any rental income since the acquisition of your rental property.

You were entitled to receive rental income. However, you have not received any rent. As you did not receive any rental income, no rental income is included in your assessable income.

Should you receive the rent in a later income year, then the rental income will be assessable in that year.