Private ruling: Rental property
Published: September 2014
Ruling period: Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2013

Ruling: Q1: Does part of the rental income form part of your assessable income? | A1: Yes. | Q2: Are you entitled to claim a portion of expenses in relation to your rental property? | A2: Yes.


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 Income tax: rental property - division of net income or losses between co-owners refers to the division of the net income or loss between joint owners of a rental property. TR 93/32 states that the income/loss 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. In your case you originally agreed to a particular ownership interest in the property and the title deed shows this ownership interest. Although you have verbally agreed not to claim your share in relation to the rental property, this is not sufficient to show that you no longer hold an equitable and legal interest in the property. Therefore as the title deed still shows you as having an ownership interest in the property, you are entitled to a portion of the rental income and also entitled to claim a portion of the associated expenses incurred. It is acknowledged that you may not actually receive any of the rental income or contribute to the rental property expenses. However this is regarded as a private arrangement and has no effect for taxation purposes. When the property transfer is completed and your name is no longer on the title deed, then you are no longer entitled to any rental income or claiming any rental expenses. Therefore, until the title deed is amended to exclude you as owner, a portion of the rental income derived from the property is assessable income for you. Also a portion of any expenses in relation to the property are deductible for you.

Relevant facts: You and your previous partner purchased a rental property. | It was agreed that you would purchase the property as tenants in common with different shares held by both of you. The title deed shows you having a share of ownership in the property. | You have now separated from the co-owner of the property. | For the 2013-14 financial year you stopped contributing to the property. | You entered into a verbal agreement with your previous partner that you are not entitled to claim your share of interest and you are happy if they claim the total amount. | The loan for the property was in joint names. | The rental income for the property is now deposited into your previous partner's bank account. | The title deed has not been amended to show your previous partner as the sole owner.