Private ruling: Rental property income/loss
Date of advice: 9 August 2016
Published: September 2016
Ruling period: Year ending 30 June 2016 | Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020 | Year ending 30 June 2021
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you entitled to include all the rental income and expenses associated with your rental property in your tax return? | A1: Yes

Relevant facts and circumstances: You own an investment property that you are considering to refinance. You are the only person listed on the property title and the current home loan. You have refinanced the loan to a different bank which will allow you to obtain a lower interest rate. To achieve the serviceability with the new bank, the refinancer added your spouse's name to the home loan account. Loan repayments are made solely from your income. Costs associated with your rental property are made solely from your income.

Relevant legislative provisions: Income tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 8-1

Reasons for decision: Summary: Rental income is assessable as ordinary income under section 6-5 of the I ncome tax Assessment Act 1997 (ITAA 1997). 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. Rental income is assessable as ordinary income under section 6-5 of the Income tax Assessment Act 1997 (ITAA 1997). 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 provides that the income or loss from rental properties must be shared according to the legal interests of the owners, except in limited circumstances where there is sufficient evidence to establish that the equitable interest is different from the legal title. Paragraph 41 of TR 93/32 specifies that where taxpayers are related as husband and wife, the equitable right is assumed to be exactly the same as the legal title. Taxation Ruling TR 95/25 Income Tax: deductions for interest under section 8-1 of the Income Tax Assessment Act 1997 following FC of T v. Roberts; FC of T v. Smith outlines the Commissioners view when refinancing occurs. Hill J stated ( Roberts and Smith ATC at 4388; ATR at 504): 'the character of the refinancing takes on the same character as the original borrowing'. In your situation, your name is the only name on the title deed of the property. Your name was the only name on the original mortgage loan. Your spouse's name on the new mortgage does not affect the legal ownership of the property. You hold 100% ownership of the property and therefore you must declare or claim 100% of any rental income or loss.