Private ruling: Rental income
Date of advice: 27 February 2026
Published: 20 April 2026
Ruling period: Year ending 30 June 20YY | Year ending 30 June 20YY
Date scheme commenced: DD MM YYYY

Ruling: Q1: Are you assessed under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) on your 50% share of the rental income derived from the dwelling located at the property? | A1: Yes.

Relevant facts and circumstances: You are an Australian tax resident. After 20 September 1985, you jointly purchased the dwelling located at the property. Since purchase, you have treated the property as your main residence. Person A is your child. You and Person A entered into a verbal agreement that Person A may rent out a portion of the property. On DD MM YYYY, the property was transferred to you and Person A as joint tenants. On DD MM YYYY, Person A entered into an agreement through a website to rent a portion of the property to an unrelated party. There was no written agreement with the tenants. You and Person A still live in the property. Person A manages the bills associated with renting and receives all the rental income.

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

Reasons for decision: Summary: Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners , provides the Commissioner's view on the basis upon which, for income tax purposes, the division of the net income or loss from a rental property between the co-owners of that property. Paragraphs 3 to 6 of TR 93/32 state: 3. Co-ownership of rental property is a partnership for income tax purposes but is not a partnership at general law unless the ownership amounts to the carrying on of a business. 4. Where co-ownership is a partnership for income tax purposes only, the income/loss from the rental property is derived from co-ownership of the property and not from the distribution of partnership profits/losses. 5. Because co-owners of rental property are generally not partners at general law, a partnership agreement, either oral or in writing, has no effect on the sharing of income/loss from the property. 6. Accordingly, the income/loss from the 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. Paragraph 22 discusses the general proposition of a partnership at general law 22. As a general proposition, it is more accurate to describe the owners of rental property in the words of Beaumont J in McDonald's case at ATR p.969; ATC p 4552 'as co-owners in investments rather than as partners in a business operation.' Consequently, co-owners of rental property are generally not partners at general law with the result that they are not subject to the general law applicable to partnerships including the division of profits and losses from the property. Paragraph's 24 to 26 discuss partnerships for taxation law 24. The definition of partnership is wider for income tax purposes than it is at general law. Subsection 6(1) of the Income Tax Assessment Act 1936 (the Act) defines partnership as 'an association of persons carrying on business as partners or in receipt of income jointly but does not include a company.' 25. Under the extended income tax definition of partnership, it is not necessary that persons carry on a business for their association to be treated as a partnership for income tax purposes. They need only to be in receipt of income jointly . Therefore, co-owners of rental property come within the definition of "partnership" for income tax purposes, not because they are necessarily partners at general law, but because they are in receipt of income jointly. 26. Whether a partnership exists at general law is of significance for taxation purposes as McDonald's Case at ATR p 967; ATC p 4550 shows: 'For taxation purposes, the Act takes the taxpayer's income as it finds it, that is to say, subject to the general law in all its aspects. This will pick up the position at law and in equity modified by any relevant legislation, including the provisions of the Act itself: see MacFarlane v. FCT (1986) 17 ATR 808; 67 ALR 624 at 636.' Paragraph 38 of TR 93/32 discusses legal and equitable interests and states: 38. It has been said that if the equitable interest does not follow the legal title, there is some basis for the profit/loss to be distributed on the equitable and not the legal basis. Example 1 in paragraph 43 of TR 93/32 provides an example of the profit and loss distribution where the property was owned jointly 50:50. It states the agreement to share the profits and losses in different proportions is a private arrangement which has no effect for income tax purposes. Application to your circumstances In your case, the only relevant relationship between you is that of co-ownership. As joint tenants at law and in equity, the profits or losses from letting the property must be shared equally. Consequently, any private agreement to share the profits or losses in different proportions has no effect for income tax purposes. You are assessed on your 50% share of the rental income under section 6-5 of the ITAA 1997.