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Edited version of your private ruling
Authorisation Number: 1012583713042
Ruling
Subject: Joint loan
Question 1
Are you considered to be the beneficial owner of the investment property and as such required to declare all rental income and expenses in your personal tax return?
Answer
Yes
Question 2
Will you be liable for any capital gain or capital loss when a capital gains tax (CGT) event happens in relation to the property?
Answer:
Yes
This ruling applies for the following period
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
1 July 2012
Relevant facts
You purchased an investment property.
You paid the deposit.
Because you were not permanently employed, the bank required your parent to appear on the loan and title.
You have paid all expenses in relation to the property including all loan repayments.
Your parent has relinquished all claims to the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 102-20
Income Tax Assessment Act 1997 Section 104-10
Income Tax Assessment Act 1997 Section 106-50
Taxation Administration Act 1953 Sch1-section 359-10
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 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 an income year. Rent is regarded as ordinary assessable income.
Taxation Ruling TR 93/32 explains that the net loss or income 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. An example of where the equitable interest may differ from the legal interest is when an owner is holding their share as trustee for the other owner.
In your case, it is accepted that you are the beneficial owner of Lot X. Any income in relation to the property should therefore be declared by you as you are the beneficial owner of the property.
Capital Gains Tax (CGT)
Generally, you acquire a CGT asset when you become its owner or start to hold an ownership interest in it. You may subsequently make a capital gain or capital loss when a CGT event happens in relation to that asset.
You have an ownership interest in a property if:
· you have a legal or equitable interest in the land which the dwelling is erected upon, and
· you have a right or licence to occupy the dwelling.
In the absence of evidence to the contrary, property is considered to be owned by the person registered on the title. As there is sufficient evidence to demonstrate that you are the beneficial owner of the property you may subsequently make a capital gain or capital loss when a CGT event happens in relation to that asset.