Decision impact statement
Applicant and Commissioner of Taxation
Venue: Administrative Appeals Tribunal
Venue Reference No: 2011/2025
Judge Name: S M Ettinger
Judgment date: 21 March 2012
Appeals on foot: No.
Decision Outcome: Partly Adverse
Impacted Advice
Relevant Rulings/Determinations:- None
Subject References:
Assessment of income
Rental property deduction
Précis
Outlines the ATO response to this case which concerned whether certain outgoings claimed by the taxpayer to be deductible rental expenses were in fact incurred in the course of deriving rental income.
Brief summary of facts
During the relevant period, the taxpayer owned several rental properties in regional New South Wales.
For the 2007 income year, the taxpayer lodged an income tax return claiming a deduction of $6,670 for expenses in respect of maintaining the properties.
Sometime later, the taxpayer requested that her 2007 income tax assessment be amended to increase the claim by $5,208.
The Commissioner disallowed the additional claim on the basis that he was not satisfied that there was a nexus between the expenses claimed by the taxpayer to have been incurred and the income producing activity; namely the renting out of the properties. He also disallowed the original deduction of $6,670.
In concluding that there was no nexus between the expenses and the income producing activity, the Commissioner relied on the fact that in the 2007 income year the taxpayer did not earn any rental income. Further, the Commissioner was not satisfied that the property was available for rent in the 2007 year, or that the additional rental expenses claimed as deductions had been sufficiently substantiated.
Issues decided by the court or tribunal
Whether the property was available for rent in the 2007 financial year ;
The Tribunal found that the property was available for rent in the 2007 financial year.
If the property was available for rent , whether the taxpayer incurred and was entitled to a deduction for rental expenses totalling $ 11 , 878.47 or a similar figure ?
The taxpayer was only able to substantiate before the Tribunal that the following expenses were incurred: $100 for lawn mowing; $245 for insurance and $102 for advertising. Accordingly, the Tribunal found that the taxpayer could only claim these amounts as deductions.
ATO view of Decision
The case was decided on its facts and will not have any impact on any existing or future litigation proceedings.
Administrative Treatment
Implications on current Public Rulings & Determinations
None
Implications on Law Administration Practice Statements
None
Court citation:
[2012] AATA 174
2012 ATC 1-043
(2012) 87 ATR 937
Legislative References:
Income Tax Assessment Act 199
8-1
Case References:
Case R118
(1984) 84 ATC 773
27 CTBR (NS) 1318
Fletcher v Federal Commissioner of Taxation
[1991] HCA 42
173 CLR 1
22 ATR 613
91 ATC 4950
Re Inglis and Federal Commissioner of Taxation
(1987) 87 ATC 2037
Ronpibon Tin NL v Federal Commissioner of Taxation
[1949] HCA 15
78 CLR 47