Decision impact statement

Bocaz and Federal Commissioner of Taxation

Venue: Administrative Appeals Tribunal
Venue Reference No: 2010/4160
Judge Name: Senior Member Lazanas
Judgment date: 30 November 2012
Appeals on foot: No.

Impacted Advice

Relevant Rulings/Determinations:

• Nil

Impacted Practice Statements:

• Nil

Subject References:
Rent as assessable income
Domestic tenancy agreements
Non-commercial arrangements
Deductions for expenses

Précis

Outlines the ATO response to this case concerning whether a taxpayer's share of expenses in respect of a rental property tenanted to a relative were deductible.

Brief summary of facts

The taxpayer co-owned two properties with her son as joint tenants. During the 2008 income year, the first property was occupied by the taxpayer's ex-husband, who paid $200 rent per week and agreed to undertake necessary renovations and repairs to the property. The second property was occupied by the taxpayer's joint tenant and son and he paid the taxpayer $165 rent per week. Part way during the 2008 income year the taxpayer sold her share of the second property to her other son. The taxpayer argued that the rent constituted assessable income, meaning she could deduct her expenses in relation to the properties. The expenses exceeded the rental income.

Issues decided by the tribunal

The Tribunal decided the following:

1.

The rent derived by the taxpayer from the two properties was assessable income. As the taxpayer sold her interest in the second property during the income year, only the rent that was referable to that part of the year when she owned was assessable income.

2.

The rental arrangements were not non-commercial arrangements.

3.

The taxpayer incurred interest and other expenses in respect of the properties and the taxpayer was entitled to a deduction for the expenses pro-rates, to reflect the period of the taxpayer's ownership during the year.

ATO view of Decision

This matter was decided on its facts. The decision has no wider ramifications.

Administrative Treatment

Nil

Implications for ATO precedential documents (Public Rulings & Determinations etc)

Nil

Implications for Law Administration Practice Statements

Nil

Court citation:
[2012] AATA 847
2012 ATC 10-286

Legislative References:
Income Tax Assessment Act 1997
6-5
8-1(2)
8-1(2)(b)

Case References:
Fletcher v Federal Commissioner of Taxation
(1991) 173 CLR 1
(1991) 22 ATR 613
91 ATC 4950

Federal Commissioner of Taxation v Groser
(1982) 65 FLR 121
1982) 13 ATR 445
82 ATC 4478

Federal Commissioner of Taxation v Kowal
(1983) 79 FLR 75
(1982) 15 ATR 125
84 ATC 4001

Madigan v Commissioner of Taxation
(1996) 68 FCR 12
(1996) 33 ATR 164
96 ATC 4640

Ure v Federal Commissioner of Taxation
(1981) 50 FLR 219
11 ATR 484
81 ATC 4100