Tax on no rental income

Hi I was originally in my family home (Title is in my name) with my mum and siblings). This used to be my owner occupier.

I moved out a couple of year ago and now my new place is my owner occupier.

I am still paying interest on my old owner occupier but due to a sensitive family matter I am not collecting any rent and in return my family who still live at the property will look after it in ensuring it is being looked after. I still pay all the usual council rates etc that a landlord typically pays. When it comes to my tax return my accountant advised me even if I do not collect any rent I may need to put in some “market value” rent. Is that the case? Can’t I just say the fact which is I do not get any rent and still claim the interest? Or will that mean it’s not classified as an investment property if I put down I don’t get any rent?

 

So, you're renting to family at $nil. You are paying all expenses (rates, water, insurance, land tax).

 

If you are not earning rental income you should not show rental income. And if you are not earning rental income (or trying to) you are not able to claim the interest expense.

if the property is used privately the costs are part of the ultimate profit calculation on sale.

Ask your accountant to document his:her advice. In particular ask them to document their advice to “include notional rental income from a private arrangement to make the holding costs tax deductible“.

If they refuse to do that you know what you are doing.

 

Yea I am

 

Yep, sounds like your accountant is wrong

 

This is a completely private family arrangement, not an investment property.
You earn no rent, therefore you cannot claim anything off your tax.

 

What a numpty. Tax Ruling IT 2164 is available by searching google and it says that the expenses and outgoings are limited to the extent of income received. ie Nothing. Its a private arrangement. Nowhere in the ruling does it say you can invent rental income and then claim a tax benefit.

These costs will be third element CGT costs which can be later used by you to reduce the incidence of CGT. You may also choose to use the 6 year absence rule BUT it would impose future CGT on your actual home. If you sell its a range of matters to explore.

Its time to find a tax adviser who isnt going to have you assessed with penalties for reckless preparation of a self assessment return. You may have recourse against the tax adviser however. For negligent advice.