Can I claim this as rent?

[DoobyNuts]

Issues:
- I separated from my wife in January 2012.
- We entered in a legal settlement agreement. Facts of the agreement are:
1. I will pay her a lump sum of $50000 when she vacates the property I solely own.
2. For each week she remains in the property an amount of $400 “rent” will be deducted from the $50000.



Questions:

1. Is the $400 deemed as income assessable rent?
If yes to the above, how do I prove that I have received rent as it is coming off what I owe her and she is not actually paying me ?

Reckon I need to apply for a ruling from the ATO?

 

[vaughan]

...how do I prove that I have received rent as it is coming off what I owe her and she is not actually paying me ?

Put it back on her: she'll have to show that she's made the payments -- bank transfers, etc.

 

[dan c]

Questions:

1. Is the $400 deemed as income assessable rent?
If yes to the above, how do I prove that I have received rent as it is coming off what I owe her and she is not actually paying me ?

Reckon I need to apply for a ruling from the ATO?

That's a tough one. It could be argued that the payment, whatever it ends up being, is a private property transaction, or it could be argued that it is rent for overstaying in the property.

Does your lawyer have any tax lawyers in his / her practice? The reason I ask is that the wording of the agreement will probably determine how the final payment and discounts are treated.

 

[DoobyNuts]

She hasn't made any payments.

For example if she doesnt move out for 5 months its 20 weeks x $400 = $8000 so I will have to pay her $42000 instead of $50000. I'm still paying council, water rates etc.

So is the $8000 deemed as rent? Rang a couple of tax accountants and they weren't very helpful.

 

[thatbum]

Issues:
- I separated from my wife in January 2012.
- We entered in a legal settlement agreement. Facts of the agreement are:
1. I will pay her a lump sum of $50000 when she vacates the property I solely own.
2. For each week she remains in the property an amount of $400 “rent” will be deducted from the $50000.

Occasional family lawyer here. What sort of "agreement"? Consent orders lodged with the family court?

Or something informal?

 

[DoobyNuts]

I can't ask the lawyer as they charge through the roof.

 

[DoobyNuts]

they are consent orders lodged with the family court as the final property settlement.

I couldn't get her out of the house so the agreement seemed good at the time and it was all she would agree to without a fight. She has 12 months to vacate the property.

 

[handyandy]

Why would you need to declare it at all.

The calculation will be $50k - $400 x Y weeks = the money she owes you.

She is not claiming the 'rent' as a tax deduction

You are not claiming your house expenses as deductions.

Cheers

 

[thatbum]

they are consent orders lodged with the family court as the final property settlement.

I couldn't get her out of the house so the agreement seemed good at the time and it was all she would agree to without a fight. She has 12 months to vacate the property.

Well I can't see how it would have any tax implications (although I'm not a tax lawyer/accountant).

It really is like any other set of property settlement orders in the family court - the "rent" you talk about isn't really rent, its just a method for calculating your final lump sum payment under the consent orders based on the contingency of her staying in the house.

It sounds like she is going to use the whole 12 months then?

 

[Mr. Fabulous]

Dooby, bribing her just to get her out of YOUR house... I feel for ya, mate.

 

[DoobyNuts]

I want to declare it so I can negative gear it as I'm paying 2000 a month on the mortgage

 

[thatbum]

I want to declare it so I can negative gear it as I'm paying 2000 a month on the mortgage

Well this you would need to check with a suitably qualified family and tax lawyer I'm afraid.

To be honest, I'd be surprised if you could do this - you really should have done the consent orders in a different way if you wanted this result.

 

[Jake D]

excuse my lazy maths.

$2000pm = $24,000 py (PI or IO?)

$400pw = 20,800 py

"loss" = $3,200 py

tax saving = something like $1000 py.

Is it worth the trouble? Will it mean capital gains tax or other PITAs?

 

[Terry_w]

That is an interesting question.

I don't know the answer off the top of my head, but unless it is called rent in the consent orders it sounds like a domestic situation.

You should ring the ATO and ask them. Whatever they tell you don't believe it but ask them for authority to back up their answer and see if they come up with anything.

Then submit a request for a private ruling.

 

[DoobyNuts]

The loss is a lot more than 3200. If it's treated like a normal rental then add depreciation, council rates, water, repairs etc then I am looking at 6000 plus and I'm in top tax bracket .

I called auto and explained situation. They said apply for private ruling