Private ruling: Rental property expenses
Published: October 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a deduction for your share of the property expenses? | A1: Yes.


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

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 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. In Case R16 84 ATC 179; 27 CTBR (NS) Case 67 the judge held that one tenant in common can lease premises from their co-tenant in common (so as to have exclusive possession) and be liable to pay the amount reserved by the lease, such amount being assessable income in the hands of the recipient. The amount of rent being paid was equal to that of a fully arms length transaction. In your case, your family member lives in the rental property and pays you each one third of the commercial rate for the property. Expenses incurred in deriving that income will therefore be deductible in the same proportion.

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, your spouse and a family member purchased a property as joint tenants (one third each). | Your family member rents the property and pays you and your spouse two thirds of the market rate of rent.