Private ruling: Rental property expenses
Published: September 2012
Ruling period: Year ended 30 June 2006 | Year ended 30 June 2007 | Year ended 30 June 2008 | Year ended 30 June 2009 | Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2005

Ruling: Q1: Are you entitled to a deduction for 100% of the net income loss on two jointly owned investment properties? | A1: No

Relevant facts and circumstances: You purchased two rental properties with both you and your spouse's name on the title deeds. You obtained joint borrowing for the purchases. You solely funded the purchase of the property. You will continue to fund the properties exclusively.

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

Reasons for decision: Summary: Section 8-1 of the ITAA 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 discusses the division of net income or loss between co-owners of a rental property. The ruling 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 (or beneficial) interest is different from the legal title. A person's legal interest in a property is determined by the legal title to that property under the land law legislation in the State or Territory in which the property is situated. The legal owner of the property is recorded on the title deed for the property issued under that legislation. Both you and your spouse's name are on the title deeds and loan agreements. Net income and expenses should be shared in the same proportion as their ownership interests i.e. 50:50. The fact that you have paid all the expenses on the property is of no consequence for income tax purposes. Therefore you are not entitled to a deduction for 100% of the net income loss used to purchase the rental properties.

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