Deliberately using third element costs for ip?

John buys an ip and the property is occupied by his sister Jane.

Jane receives income from a Testamentary Trust created when their parents died. Jane could use this to pay the rent, but then the income would be in effect double taxed. Rent is roughly the same as the expenses so the after tax benefit to John is low.

can John not charge Jane rent, and just add the interest, rates, body corp etc to the cost base as a third element cost? Noting John would have to pay for expenses out of after tax dollars, but would have a higher cost base when selling.

 

similar to

Tax Tip 305: Supporting Immigrant Parents by Letting Them Live in your Property – Tax Effectively Tax Tip 305: Supporting Immigrant Parents by Letting Them Live in your Property – Tax Effectively

 

John can choose to let a family member occupy the property for private reasons.

The holdings costs will not be tax deductible and will increase the cost base of a property.

 

As a wealth accumulation strategy its not very sound. Its like burning money to save tax in some respects. If you do it make sure NO paymnet is made. That said you can also use the "less rent" strategy. It often helps address cashflow burn.

eg Market rent is $400pw. You allow you parents to rent it for $200pw. 50% of costs are non-deductible and are third element costs.