Private ruling: Rental income and deductions
Ruling period: Year ended 30 June 2011. | Year ended 30 June 2012. | Year ended 30 June 2013. | Year ended 30 June 2014. | Year ended 30 June 2015.
Date scheme commenced: 1 July 2010.

Ruling: Questions and answers: | Are you assessable on 100% of the rental income as a co-owner of a rental property? | No. | Are you entitled to deduct 100% of allowable expenses incurred in relation to a rental property of which you are a co-owner? | No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1. | Income Tax Assessment Act 1997 Section 6-5(2).

Reasons for decision: Summary: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived from all sources. Rental income is a form of ordinary income. Deductions for rental properties are allowable under Section 8-1 of the ITAA 1997 or where another provision of the tax law allows. Co-owners of a rental property own that property as either joint tenants or tenants in common and rental income and expenses must be attributed to each co-owner according to their legal interest in the property. A person's legal interest in a property is recorded on the legal title to the property. Any agreement made by co-owners of a rental property, whether orally or in writing, to vary their share of income or deductions outside of their legal interest in the property has no effect for taxation purposes. Such agreements are private and domestic in nature, and do not alter or override the respective entitlements of the co-owners for taxation purposes. Generally the equitable interest is exactly the same as the legal title. In very limited circumstances there may be sufficient evidence to establish that the equitable interest in a property is different from the ownership that is on the legal title. An example of where equitable interest may differ from legal interest is when an owner is holding their share as trustee for another person. In your case, you and another person jointly purchased a dwelling. You have a 50% ownership with the remaining 50% being held by the other person. While you and the other person made an arrangement to assign responsibility to one co-owner for the rental property this is considered a private and domestic arrangement which has no effect on your legal interest in the property because the legal title has not changed. The expenses and income related to the rented dwelling must be shared according to the proportion of the legal interest held by you and the other person. Accordingly, while you own only 50% of the property you are only: · assessable on 50% of the rental income and, · entitled to deduct 50% of the allowable deductions.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: You purchased a dwelling in joint names with another person. You each have a 50% ownership interest as joint tenants. | You both occupied this dwelling as your main residence. | You both vacated the dwelling and agreed it would be made available for rent. | It was agreed that you would accept all responsibility for the dwelling; including loan payments, rates, and other expenses related to the maintenance of the rental property, with the rental income to be deposited directly into the loan account for the property.