Private ruling: Rental income and expenses
Date of advice: 19 August 2016
Published: September 2016
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015

Ruling: Q1: Is the rental property income to be disclosed in your tax return? | A1: Yes. | Q2: Are the rental property expenses (including interest on the loan to purchase the property) to be claimed in your tax return? | A2: Yes.

Relevant facts and circumstances: You jointly owned rental properties. You became a bankrupt upon the official receiver's acceptance of the respective debtor's petitions. The trustees disclaimed the properties. The bankruptcy was annulled. The properties were still rented after the date of bankruptcy, by the agents who you had appointed previously. The sale dates of the properties are well after the annulment date of bankruptcy. The properties were available for rent up until they were sold. Mortgages were held over the properties by different banks. During this bankruptcy period of X months, the trustee did not collect any rent or pay any expenses on the rental properties. All the properties were sold.

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

Reasons for decision: Detailed Reasoning - Rental Income: Rents under a residential lease arrangement are assessable as ordinary income. They are generally assessable on a receipts basis. Rental income earned by co-owners of a property must generally be shared according to their legal interests except where they can establish that their equitable interests are different. You have stated that the trustee in bankruptcy disclaimed the interest in the rental properties. This disclaiming of the properties is subject to the mortgagees exercising their option to set aside the | Detailed Reasoning - Rental expenses: Deductions may be claimed under section 8-1 of the Income Tax Assessment Act 1997 for expenses relevant and incidental to the production of rental income derived by a landlord. Deductions may also be allowable under other specific provisions. These would normally be claimable from the time the property is listed for rental with an estate agent. You have indicated that the properties were rented or available for rent and you have continued to incur the rental property expenses up until the time the properties were sold. These expenses would be deductible to the extent of your ownership in the properties. You should be able to provide the necessary records to show the expenses incurred.