Private ruling: Rental property expenses
Published: April 2013
Ruling period: Year ending 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to claim 100% of the expenses from your co-owned rental property? | A1: No


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

Reasons for decision: Summary: Taxation Ruling TR 93/32 explains that the net 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. An example of where the equitable interest may differ from the legal interest is when an owner is holding their share as trustee for the other owner. A person's legal interest in a property is determined by the legal title to that property under the land legislation in the State or Territory in which the property is situated. The legal owner of the property is recorded on the title deed for the property issued under that legislation. Rental income and expenses must be attributed to each co-owner according to their legal interest in the property, despite any agreement between the co-owners, either oral or in writing stating otherwise. Where a co-owner forgoes their share of the rental income and/or pays for all the expenses this is considered to be a private arrangement between the co-owners. It does not alter the fact that they are legally entitled to their share of the income and liable for their share of the expenses. In your case, you are a co-owner of a rental property with another couple. The other co-owners refuse or are not capable of paying their share of the expenses and you are left to pay all the bills. As stated above this decision is a private arrangement between yourselves. Therefore, you must declare the income and claim the deductions with respect to the property in proportion with your legal interest in the property. The fact that one co-owner is paying all the expenses from the property is of no consequence for income tax purposes.

You cannot rely on the rulings in the Register of private binding rulings in your tax affairs. You can only rely on a private ruling that we have given to you or to someone acting on your behalf. | The Register of private binding rulings is a public record of private rulings issued by the ATO. The register is an historical record of rulings, and we do not update it to reflect changes in the law or our policies. | The rulings in the register have been edited and may not contain all the factual details relevant to each decision. Do not use the register to predict ATO policy or decisions. | You are paying all the bills as the other co-owners are refusing or are not capable of paying their share of the rental property expenses. | You and the co-owners have an interest only loan on the property.