Private ruling: Rental Income - Intra-Family Arrangement
Date of advice: 4 September 2015
Published: September 2015
Ruling period: The year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you required to report as income monies received as part of an intra-family arrangement? | A1: No.

Relevant facts and circumstances: You purchased a property on behalf of a family member. You purchased the property to assist with the loan. You have a verbal agreement; that your family member will refinance the loan when they have enough equity/savings. They cover all costs; including loan repayments, rates, insurance and all other sundry expenses. You receive no taxable benefit from the property; nor do you intend to in the future. The loan and title are both in your name

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision: Summary: Income from property is generally assessable under Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) as ordinary income. Taxation Ruling TR 93/32 states, in paragraph 6, that the net income/loss from a property must be shared according to the legal interest of the owners, except in very limited circumstances where there is sufficient evidence to establish that the beneficial owner is different from the legal title. A legal owner is the individual who has their name on the legal documents associated with the asset, an example would be the title deed for a property. An individual can be a legal owner but have no beneficial ownership in an asset. A beneficial owner is defined in Taxation Ruling IT 2486 and Taxation Determination TD 92/106. A beneficial owner is the person or entity who is beneficially entitled to the income and proceeds from the asset. In some cases, an entity may hold a legal ownership interest in property for another individual in trust. In this case, we accept that although you hold a legal interest in the property, you are not the beneficial owner. Your family member is living in the property and is paying all the expenses in relation to the property and they are the beneficial owner of the property. You receive money from them for the sole purpose of paying the loan, interest and other expenses for the property held in your name for his benefit. These payments are made as part of a close intra-family arrangement and are not considered to be assessable income in your hands.