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Edited version of your written advice
Authorisation Number: 1012767996287
Ruling
Subject: Rental property expenses
Question 1
Are you entitled to claim a deduction for all the outgoings for rental properties of which you are not a joint owner?
Answer
No.
This ruling applies for the following period:
Year ended 30 June 2014
The scheme commences on:
1 July 2013
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You and your spouse purchased a property as a main residence during the relevant financial year.
Due to the nature of your work and the type of persons you sometimes deal with, you decided to purchase the property in your spouses' maiden name.
You lived in the property for the next X years.
In early 20XX, your spouse was diagnosed with some serious health problems which have prevented them from working.
You and your spouse moved to the country and rented a house.
You then rented out your property.
You have paid all expenses associated with the property.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
Section 8-1 of the Income Tax Assessment Act 1997 (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.
Taxation Ruling TR 93/32 explains that the 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 (paragraph 6). It goes on to explain at paragraph 41, that where taxpayers are related, for example, husband and wife, the equitable right is presumed to be exactly the same as the legal title.
A person's legal interest in a property is determined by the legal title to that property under the land law legislation in the State or Territory in which the property is situated. The legal owner of the property is recorded on the title deeds for the property issued under that legislation.
In this case, you are not shown on the title deed to the property as an owner.
Where the title deed indicates sole ownership of a property, the legal owner should declare all of the rental income and claim all of the rental expenses. The fact that another party may have paid the expenses is of no consequences for income tax purposes. The ATO treats the payment of the other party's share of the expenses as no more than a loan from the other party to the taxpayer (Taxation Ruling TR 93/32 paragraph 49).
Therefore, as you are not listed on the title to the property as an owner, for income tax purposes you cannot declare any rental income, or claim any of the rental expense deductions.
While we can appreciate your circumstances, the Commissioner does not have any discretion under the tax law to allow a taxpayer to claim more or less than their legal entitlement to investment property income and expenses.