Private ruling: Rental property - ownership
Published: July 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to claim 100% of your rental property expenses when your legal ownership interest in the property is 50%? | A1: No

Relevant facts and circumstances: You own a rental property in equal shares with your spouse. Soon after purchasing the property you and your spouse separated. Your spouse has left Australia and has no intention to return. You are paying all of the rental property expenses. Your spouse has not made any contribution to the rental property expenses.

Relevant legislative provisions: Income Tax Assessment Act 1997

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (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. Taxation Ruling TR 93/32 explains that the loss or income from a rental property must be shared according to the legal interest of the owners, except in those very limited circumstances where there is sufficient evidence to establish that the equitable interest is different from the legal title (paragraph 6). It goes on to explain at paragraph 41, that where taxpayers are related, for example, husband and wife, the equitable right is presumed to be exactly the same as the legal title. A person's legal interest in a property is determined by the legal title to that property under the land law legislation in the State or Territory in which the property is situated. The legal owner of the property is recorded on the title deeds for the property issued under that legislation. In your case, your rental property is owned jointly with your spouse. Thus, the loss or income from the rental property must be shown in equal shares between you and your spouse. Although you state your spouse has not contributed to the rental property expenses, it is not considered that your circumstances are sufficient to facilitate the declaration of the rental income and expenses other than in accordance with the legal title.