Private ruling: Rental income - legal vs beneficial ownership
Date of advice: 12 September 2023
Published: 24 October 2023
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Can Person A and Person B disregard the rental income or losses from the property ? | A1: Yes. Based on the facts, the Commissioner accepts that in the circumstances, although you are legal owners of the property, you do not have any beneficial ownership in the property. For further information, Taxation Ruling TR 93/32 Income tax: rental property - division of net income or loss between co-owners provides guidance on the issues involved when the equitable interest does not follow the legal title.

Relevant facts and circumstances: The property was purchased on XXXX. It is an investment property and rented. The legal title holders of the property are Person A, Person B and their child Person C. Person A and Person B each hold X% ownership interest in the property. Person C holds the remainder X% ownership interest in the property. The legal title holders are joint tenants to the property. Person A and Person B wanted to assist Person C in purchasing a property and used their investment property as collateral to obtain finance to purchase the property. Person A and Person B are both co-borrowers on the loan. Person A and Person B have not contributed towards the purchase price of the property or provided financial assistance on the mortgage payments. Person A and Person B have not incurred any expenses related to the property's ownership or have received rental income. Person A and Person B have never lived or stored their possessions or assets at the property. There is no written agreement between any party regarding how the property was to be treated. Person A and Person B have not lodged their 20XX income tax returns or declared any rental income or expenses from the property in any of their tax returns.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 102-20 | Income Tax Assessment Act 1997 section 104-10