Private ruling: interest expense
Published: October 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to a deduction for 100% of interest expenses on a rental property which is jointly owned? | A1: No.

Relevant facts and circumstances: You and your spouse own a rental property as joint tenants. Your taxable income is greater than the income of your spouse. The investment loan is solely in your name.

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

Reasons for decision: Summary: Co-owners of rental property generally hold the property as joint tenants or tenants in common. The income and loss from a rental property must be shared in the proportion of ownership. Taxation Ruling TR 93/32 states that the net income or 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. A person's legal interest in a property is determined by the legal title to that property under the land law legislation in the State or Territory in which the property is situated. The legal owner of the property is recorded on the title deeds for the property issued under that legislation. You are currently funding all of the interest on the loan for the property yourself, as your spouse has limited income. While we accept that you are paying all of the interest expense relating to the property, this does not mean that the equitable interest in the dwelling is different from the legal interest. Therefore, you must include the outgoings spent according to your percentage of ownership as stated in the title deed of the property.