Private ruling: Rental property expenses
Published: June 2012
Ruling period: Year ended 30 June 2010.
Date scheme commenced: 1 July 2009.

Ruling: Q1: Are you entitled to a deduction for 100% of the rental property expenses where you have a 50% ownership in the rental properties? | A1: No. | Q2: Are you entitled to a deduction for 50% of the rental property expenses where you have a 50% ownership in the rental properties? | A2: Yes.

Relevant facts and circumstances: You have a 50% ownership interest in a number of rental properties. For some of the rental property expenses, you paid 100% of the expense.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 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. In your case, you have a 50% ownership interest in a number of rental properties. For some of the rental property expenses, you paid 100% of the expense. Therefore, for tax purposes, the total expenses must be shared according to the proportion of the legal interest in the properties held by you and the other owner(s) of the properties, regardless of who paid for the expenses. This means that you can only claim a deduction for the proportion of the total expenses that is equivalent to your 50% proportion of legal interest in the properties. Likewise, you can only include in your assessable income the income that is equivalent to your 50% proportion of legal interest in the rental properties.

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