Private ruling: Rental income
Published: May 2013
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Is the income received by your relative for the rent from your property assessable to you? | A1: Yes


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: Taxation Ruling TR 93/32 explains that the net 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. An example of where the equitable interest may differ from the legal interest is when an owner is holding their share as trustee for the other owner. A person's legal interest in a property is determined by the legal title to that property under the land 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. Rental income and expenses must be attributed to each co-owner according to their legal interest in the property, despite any agreement between the co-owners, either oral or in writing stating otherwise. Where a co-owner forgoes their share of the rental income and/or pays for all the expenses this is considered to be a private arrangement between the co-owners. It does not alter the fact that they are legally entitled to their share of the income and liable for their share of the expenses. In your case you have moved out of your house and moved into your relatives' house. You have put your house up for rent and have an agreement with your relative that they receive all the rent in exchange for you living in their house rent free. As stated above this decision is a private arrangement between you and your relative Therefore, as you are the legal owner of the property you are assessable on the rent received.

Relevant facts: You purchased a residential property, which has been used as your main residence. | In the 20xx-xx financial year you moved into your relatives' house and your relative moved into another property. | Once you moved into your relatives' house you started renting out your house. | You entered into an agreement with your relative that they receive the rent from your property in exchange for living rent free in their house. | Your relative pays for the outgoings and management obligations in regard to your property.