Bocaz and Federal Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2010/4160)
Judgment date: 30 November 2012
Date published: 15 February 2013

Summary of decision:
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.

Overview 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. | 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.

Issues decided:
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. 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

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