Private ruling: Non-arms length rental
Published: October 2011
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011
Date scheme commenced: 1 July 2009

Ruling: Q1: Are the payments received from your children for living in your property assessable to you as rental income where the payments are not at a commercial rate? | A1: No.


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

Reasons for decision: Summary: Subsection 6-5(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a taxpayer includes income according to ordinary concepts. Taxation Ruling IT 2167 (IT 2167) examines the situation where a property is let to relatives in a non-arms length transaction. Where the rent payment received amounts to a contribution to expenses, and is not considered as a reward to the home owner but is instead a private arrangement, the rent is not considered assessable income. You are renting your property to your children for a rate well below the market rate for the property and this is considered to be a private arrangement. The fact that you also live in the property when you return from your work duties lends weight to the arrangement being private. In your case, you are renting your property in a non-arms length transaction and the money you receive from your children is not assessable. It should be noted that as the payments are not assessable any expenses in relation to the property are not incurred in gaining or producing assessable income and are therefore not deductible.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You have purchased a property where your children live and pay you an amount per week. | The market rate for the property is more than double the amount your children pay you per week. | You work away for a period of weeks and then return to stay at the property with your children.