FYI - This is a copy and paste re an AAT (Administrative Appeals Tribunal) hearing relating to a denist and the ATO.
(the full link to the case on the AAT website is pasted below)
Danny D.
Rental property
The taxpayer also purchased a property from his mother, with the expressed intention of renting it out. However, the taxpayer moved into the house and his parents stayed there for all the relevant years of income. Part of the house was also used as an office for the family's tax return preparation business, Scott Practice Services (see Scott & Ors v FC of T 2002 ATC 2158).
There was no formal lease agreement between the taxpayer and his parents although the taxpayer claimed that he returned rental income of $120 per week based on the market rental of $180 per week. At least some of the rent was paid by Scott Practice Services, and the taxpayer's parents purchased groceries that the taxpayer consumed in lieu of cash rental payments.
For the relevant years, the taxpayer claimed deductions, including loan interest, in respect of the rental property which were substantially in excess of the rental income received.
The AAT had no difficulty in concluding that the taxpayer's arrangement with his parents was a private one. Factors indicating this included that: the taxpayer occupied the rental property alongside his parents; and that taxpayer appeared to be consuming rental payments in the form of groceries, and perhaps other domestic services. Accordingly, the expenditure was not incurred for the purpose of deriving rental income and was therefore not deductible.
AAT ref: [2002] AATA 1158 -- QT2001/542-544 (BJ McCabe, Member), 12 November 2002, Brisbane.
http://www.austlii.edu.au/cgi-bin/disp.pl/au/cases/cth/aat/2002/1158.html?query=title+(+"scott"+)
(the full link to the case on the AAT website is pasted below)
Danny D.
Rental property
The taxpayer also purchased a property from his mother, with the expressed intention of renting it out. However, the taxpayer moved into the house and his parents stayed there for all the relevant years of income. Part of the house was also used as an office for the family's tax return preparation business, Scott Practice Services (see Scott & Ors v FC of T 2002 ATC 2158).
There was no formal lease agreement between the taxpayer and his parents although the taxpayer claimed that he returned rental income of $120 per week based on the market rental of $180 per week. At least some of the rent was paid by Scott Practice Services, and the taxpayer's parents purchased groceries that the taxpayer consumed in lieu of cash rental payments.
For the relevant years, the taxpayer claimed deductions, including loan interest, in respect of the rental property which were substantially in excess of the rental income received.
The AAT had no difficulty in concluding that the taxpayer's arrangement with his parents was a private one. Factors indicating this included that: the taxpayer occupied the rental property alongside his parents; and that taxpayer appeared to be consuming rental payments in the form of groceries, and perhaps other domestic services. Accordingly, the expenditure was not incurred for the purpose of deriving rental income and was therefore not deductible.
AAT ref: [2002] AATA 1158 -- QT2001/542-544 (BJ McCabe, Member), 12 November 2002, Brisbane.
http://www.austlii.edu.au/cgi-bin/disp.pl/au/cases/cth/aat/2002/1158.html?query=title+(+"scott"+)
