Complicated set-up - advice please?

I know this is probably an 'ask your accountant' type question, but I don't have one (I've always done my tax returns myself) so I thought I'd get some opinions before taking it further.

Say I were to buy a property with another party (okay, my mum) as "tenants in common". She would live in the property and pay me half the market rental to occupy it.

Any idea whether this can be done? Can this be considered owner-occupied as far as her half is concerned and investment property as far as my half goes? That is, can I then deduct interest, expenses etc. as per normal as long as everything is done as though it were a 'standard' investment property? Could I set it up as 25/75 shares hers/mine? (Because this is closer to what it would actually be.)

Any helpful feedback appreciated :)
This is a tricky one.

Yes, you can buy a property with another as tenants in common. The proportions can be decided to reflect the degree of ownership.

Think of Tenants-in-common as a pie - you cut the pie in two and one portion belongs entirely to one person and the other portion to the second portion. Legally they are free to do whatever they wish with their portion. Even sell it to a third party if that can be arranged.

Your mum's portion would be her PPOR and therefore CGT free to her.

Your portion could be an IP. You could rent it to your mum by establishing market rental and charging her the percentage of that rent which reflects your percentage of ownership. i.e. market rent $200, you own 87% of the property so rent is $174. This then becomes an "arms-length" investment for you and therefore all the expenses would be tax deductible.

With the purchase your mum would pay owner stamp duty, you would pay investor stamp duty, which is often higher.

Any joint expenses (rates, insurance, repairs) would be shared in proportion to ownership. Usage expenses (electricity, excess water) would be the responsibility of the occupier, unless you included these in the rental amount.

Ensure you keep good records. Get one or two local PMs to give you a written rental appraisement of the weekly rent to support the rental you agree upon. Prepare a lease (download forms from the internet). Not sure on the bond issue, a call to the state RTA should let you know if you HAVE to lodge one.

This is my impression of the "rules" only and not to be relied upon to make a decision. Before embarking on an investment it would be wise to pay for a consultation with an accountant - phone and enquire the cost for a "one-off" discussion, 20-30 minutes should be more than enough if you prepare your questions.
I can't see any problem with what you're proposing, although for a qualified answer you should get advice from an accountant.

I my understanding is that tax deductions and benifits are based on the ownership. If you own 75% of the property, you're able to deduct 75% of the interest.

Your Mum would be entitled to 25% of the capital gains, which would be tax exempt if she lives in the property.

To keep things consistant and fair, she'd have to pay you 75% of the market rent and make 25% of the mortgage repayments.
Just to say thank you for the replies! I can't help thinking it probably does sound a little too complicated for my taste but it could definitely be an option.
It can work easily.

But think of your next purchase. Your next loan application will reflect you as being exposed to 100% of the loan even though you are just "responsible" for 75%.

In fact both you and your mother - as joint borrowers - will be each liable for 100% of the loan should the other have a financial issue and default. Prob pretty safe with your Mum but still consider it.
I could be wrong, but I didn't think you could claim it as an IP for tax purposes if any of the owners were the sole occupants of the property.

I would ring the ATO and ask their opinion on this one. Maybe get a private ruling...