Private ruling: Rental property
Date of advice: 1 August 2017
Published: November 2017
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2016

Ruling: Q1: Are you required to declare any rental income and/or expenses relating to the rental property after the Family Court Order? | 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: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that assessable income includes income according to ordinary concepts, which is called ordinary income. Rent is regarded as ordinary assessable income. Section 8-1 of the 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 Income tax: rental property - division of net income or loss between co-owners discusses the income/loss from a rental property jointly owned by husband and wife. The ruling states that this income and expenses 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 or beneficial interest is different from the legal title. Where taxpayers are related, such as husband and wife, the equitable right is the same as the legal title. TR 93/32 states at paragraph 11 that it is the legal interest which ultimately determines the division of the net income or loss from the property. That is co-owners must divide the income and expenses for the rental property in line with their legal interest in the property according to the title deed. If they are joint tenants, they each hold an equal interest in the property. In your case, following the Family Law Act 1975 Consent Order , the property is to be sold and until such time, your former partner is to receive all the income and be responsible for all the expenses in relation to the property. This effectively confirms your beneficial interest in the property is different to the legal title. That is, the Consent Order is sufficient evidence to show that any of the income and expenses from the property no longer belongs to you. Before the Court Order, there is no evidence for tax purposes to establish that your equitable or beneficial interest in the property is different to your legal interest. However, from the date of the Court Order you are not required to declare any rental income or rental expenses in relation to the property. The fact that the property will not be sold until a later date does not change this.

Relevant facts: You and your previous partner jointly purchased a rental property. | The Family Court ordered the property to be sold. The order included specific details regarding the other partner paying for all expenses and being entitled to all income up until sale. | You have had no involvement in the rental property since the Court Order and your former partner pays the mortgage and expenses and has all records relating to the property.