Private ruling: Rental deduction
Published: March 2014
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to a deduction for a reasonable amount paid to your adult relative who acts as your property agent managing your investment property? | A1: Yes

Relevant facts and circumstances: You own a rental property in an area. You intend to use your adult relative who lives in the same area, as your property agent. You expect your relative to carry out all the duties of property management which are currently carried out by a qualified real estate agent. In return for your relative's property management services you will pay them a percentage of the rental income. You will also pay your relative a monthly payment for expenses and one week's rent as a letting fee for the successful lease of the property. These amounts are what you currently pay the real estate agent who manages your property.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses or outgoings to the extent to which they are incurred in gaining or producing assessable income, except to the extent that they are outgoings of a capital, private or domestic nature. A landlord can claim a deduction for expenses that are incidental and relevant to earning rental income. Property management fees are an example of such an expense under section 8-1 of the ITAA 1997. In your case your relative will be acting as a property agent. Where the duties and payment for their role are in line with what is considered reasonable you are entitled to a deduction for the expense incurred to have your relative manage your rental property.