Beneficial arrangements

Question from Garnet updated on 15th February 2018:

After the death of my mother, I became a tenant in common in equal shares with my father, of the family home. It has two stories of the same size. Upstairs is the old house, downstairs is a self contained flat. If I rent out just the upstairs, will all the income and all the tax liability be mine alone? He is going to a nursing home and I would like to arrange things for him in the most beneficial way possible.

Our expert Mark Withers responded:

My view is that the starting point is to determine the ownership of the property. Where that is joint the income would be joint - in the same way that you are both liable for costs like rates on the property. That said, if by agreement your father waives his right to the income from the property it would not seem unreasonable for it to be declared solely by you.

I am not suggesting though that this is appropriate simply to defeat the incidence of tax or alter his aged care entitlements. I only think it would be appropriate if the arrangement is genuine and you are the beneficial owner of the income by mutual agreement.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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