Private ruling: Rental income
Date of advice: 21 September 2023
Published: 30 October 2023
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are the payments received by your sibling representing gross rental income in relation to a rental property you own assessable income to you? | A1: No. Your rental property has been sub-leased to your sibling for $0 under a verbal domestic arrangement. As such, any rights to lease the property and receive rental income were given to your sibling who now holds the right to lease the property. Your sibling receives the rental income, and they also incur property expenses which they pay themselves. Apart from an amount your sibling transferred to you to cover strata fees on your rental property (which you intend on declaring as rental income) your sibling has not transferred any other amounts of the gross rental income to you. Accordingly, apart from the amount transferred to you to cover the strata fees, all other amounts received by your sibling from the property management agent representing gross rental income received is not assessable income to you, as the rental income has been directly paid to your sibling who holds the right to lease the property, which is evidenced by the supplied financial statement from the property management agent. As such, this amount will not be required to be included in your income tax return as rental income.

Relevant facts and circumstances: You own a rental property. You verbally leased it to your sibling for $0 rent so long as they managed the property. Your sibling advertised the property for rent on an on-line platform, and they also secured the services of a property management company to collect the rent and service the rental property for guests. Usually, the guests stay in the property on a short-term basis. Your sibling receives the rental income via the property management company which is paid directly to their bank account, and your sibling also incurs property expenses which they pay themselves. Apart from an amount your sibling transferred to you to cover strata fees on your rental property (which you intend on declaring as rental income) your sibling has not transferred any other amounts of the gross rental income to you. Apart from the abovementioned amount you intend on declaring as rental income, you do not wish to declare any other amounts of the rental income, and you do not wish to claim any expenses relating to the rental property as a tax deduction. You have supplied a financial year statement from the property management company which lists your sibling as the property owner, and this also specifies amounts for gross rent received along with the property management companies' management fees, cleaning fees and other expenses.

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