Private ruling: Rental deduction - stamp duty
Published: May 2012
Ruling period: Year ending 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Can you claim a deduction for your portion of the stamp duty on lease documents in relation to your ACT rental property in the year the cost was incurred? | A1: Yes

Relevant facts and circumstances: You and your spouse have purchased a property as an off the plan construction. The property is in the Australian Capital Territory (ACT). As a freehold title cannot be obtained for properties in the ACT, properties are commonly acquired under a 99 year Crown lease. The property has been purchased with the intention of being a rental property once construction is completed. You are liable to pay the stamp duty to the ACT Revenue Office.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 25-20

Reasons for decision: Summary: Section 25-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states that you can deduct expenditure you incur for preparing, registering or stamping a lease if you have used or will use the property solely for the purpose of producing assessable income. Although the term lease is not defined in the taxation legislation, the general law requirement is that a lease must be granted for a definite period. A Crown lease with a term of 99 years is a lease for the purposes of section 25-20 of the ITAA 1997. In your case, your property will be acquired under a Crown lease and is therefore considered a lease for the purposes of section 25-20 of the ITAA 1997. Your property will be solely used for the purpose of producing assessable income and therefore you are entitled to a deduction for the stamp duty. The deduction will need to be apportioned to reflect the interest in the property you and your spouse hold. Taxation Ruling TR 93/32 discusses the division of net income or loss between co-owners of a rental property. The ruling explains that the loss or income from a rental property must be shared according to the legal interest of the owners, except in very limited circumstances where there is sufficient evidence to establish that equitable (or beneficial) interest differs from the legal title. While your interest in the property is that of lessee, the same principles apply and you will need to apportion the stamp duty deduction according to the interests each of you hold. Stamp duty payable to the ACT Revenue Office would be considered to be incurred when you pay it. The deduction is allowable in the year the stamp duty is paid.

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