Private ruling: Rental property income and expenses
Published: October 2013
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to declare a percentage of the income from a rental property which you assisted to fund, and claim any part of the expenses and interest you pay on the loan you took out to fund the purchase? | A1: No.

Relevant facts and circumstances: You took out a loan to assist with the purchase of a property by others whose name is on the title deed. The property is rented out. You have a written loan agreement with the title holders which states that you agree to loan an amount to the title holders. In the loan agreement, the title holders agree to pay you interest on the loan you have made to them. In the loan agreement, you agree to increase your loan to the titleholders to equal one third of the total purchase costs of the property. The loan agreement between you and the title holders states that you have one third equity in the property. You have been receiving a percentage of net rental income. You pay interest on the loan you took out to assist others with the purchase of the property. Your name is not on the title deed.

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

Reasons for decision: Detailed Reasoning - Ownership interest in rental property: Taxation Ruling TR 93/32 states that a legal interest in property is achieved by the owner being the registered proprietor of the legal title to the land. According to TR 93/32, the income/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. In your case, your name is not on the legal title of the property. There is not sufficient evidence from the documents provided to establish that the equitable interest in the property is different from the legal interest. Therefore you cannot include rental income and expenses for the property in your tax return.