Private ruling: Rental income - assessable income
Date of advice: 11 February 2021
Published: March 2021
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is the rental income assessable to you for the second dwelling located on the property that is not your main residence? | A1: No. Having considered your circumstances and the relevant factors, the Commissioner accepts that the beneficial owners are different to the legal owners of the property. You have a legal ownership in the second dwelling however, not a beneficial ownership. Any rental income or rental loss that arises on the second dwelling that is located on your property will not be included in your assessable income. You can find further information on rental property and the division of net income or loss between co-owners at Taxation Ruling 93/32 Income tax: rental property - division of net income or loss between co-owners .

Relevant facts and circumstances: You purchased property in 19XX with 100% ownership. The property is more than 2 hectares. There was one dwelling on the property at the time of acquisition (dwelling one). In 20XX you sold a portion of the property to an unrelated third party as a tenant in common. Your ownership interest changed to XX%. The new owner moved into dwelling one as their main residence from their acquisition date. You moved into the second dwelling (your main residence) built in 20XX. Each dwelling is separate to each other and has its own ease of access. Dwelling one was sold in 20XX to members of your family as tenants in common. Your ownership percentage remained the same. The members of your family are Australian citizens but are non-residents for Australian income tax purposes. The members of your family acquired a loan, and you are named on the mortgage documents in the capacity as guarantor for security. The second dwelling has been rented since 20XX. The rental income is paid to your family members. You do not contribute to the mortgage repayments, nor receive any financial benefit from the rental income. The rental income and loss associated to the second dwelling is declared by your family members.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 118-115 | Income Tax Assessment Act 1997 section 118-130