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Edited version of your private ruling
Authorisation Number: 1012518840963
Ruling
Subject: Expenses of jointly owned rental property
Question
Are you eligible to claim all deductions on a jointly owned rental property?
Answer
No
This ruling applies for the following periods
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
The scheme commenced on
1 July 2010
Relevant facts and circumstances
You jointly own a rental property with your spouse.
You are the sole income earner, and pay for all outgoings of the rental property.
You and your spouse have agreed that you may claim all of the rental property expenses.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 8-1
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that assessable income includes income according to ordinary concepts, which is called ordinary income.
Taxation Ruling TR 93/32 Income tax: rental property - division of net income or losses between co-owners refers to the division of the 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 normally be considered to be carrying on a rental property business.
Paragraphs 38 to 41 of TR 93/32 address the legal and equitable interests issue confirming at paragraph 41 that there are extremely limited circumstances where the Tax Office will accept that the equitable interest is different from the legal title. Where the taxpayers are related the Tax Office will assume that the equitable right is exactly the same as the legal title. Therefore, as you and your spouse are joint owners of the property, it is assumed that your legal and equitable interests are in parallel unless you can show that they are different.
Because of this, and as you have not provided any evidence that the legal and equitable interests are different at law, you are required to report the income and claim any expenses in the same proportion as that shown on the property title deed.
The fact that one taxpayer has paid all the expenses on the property or that an agreement has been made between co-owners does not alter this for income tax purposes.