Tenants in Common - part PPOR and part IP

Two person investment with a 50% share each. Person A will live in the house, Person B won't. Can Person B claim it as an IP if Person A pays their part of the mortgage (to the bank) and half of the market rent to Person B?

 

yes.
And it doesn't matter if it is tenants in common or joint tenants.

Get tax advice.

 

Perhaps. Its an enhanced risk for audit as there can be many factors that could affect this. eg Is rent actually paid ? Is the arrangement on fair market rent? etc

All costs (regardless of who pays them) will be likely deductible against the rent B receives to the extent of UP TO 50% by B against the (50%) rent received. However it may also be 100% non-deductible.

Consider the tax issues in the content of two examples.
1. A & B are spouses. Hubby moves to a mining town to work. eg Why does A need to pay B rent on a property that they already occupy as their own private home ?
2. A & B are friends. B has to move away for work. A allows C to occupy in B's absence and receives (50%) rent which is given to B
Spouse arrangements can be attacked far easier than the friends when this is considered.

Many parents are co-owners who co-invest to assist their kids to buy. A partnership. But its not as simple for spouses either since these partnerships are not at general law.

The TIC v JT issues is important if the shares are not equal. The ATO describes the difference well here