Private ruling: Property rented to parents
Published: November 2011
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you required to declare the income and claim expenses on a property rented to your parents at less than the commercial rate? | A1: No.


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

Reasons for decision: Summary: Subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a taxpayer includes income according to ordinary concepts. Taxation Ruling IT 2167 examines the situation where a property is let to relatives in a non-arms length transaction. Where the rent payment received amounts to a contribution to expenses, and is not considered as a reward to the home owner but is instead a private arrangement, the rent is not considered assessable income. 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, or relate to the earning of exempt income. In your case, you are renting your property in a non-arms length transaction. Therefore, the money you receive from your parents is not assessable. Likewise, as the expenses are not incurred in gaining or producing assessable income you are not eligible to claim any related deductions.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You have purchased a property with assistance from your parents where you lived with them. They agreed to pay you half the interest on the loan as rent. | As the interest rates increased, you contributed the extra and your parents continued to pay the original amount. | You have now moved out of the property and your parents continue to live there and pay the original agreed amount. | The amount they pay you is approximately half the commercial rate.