Property Income Assignment

When rental income is assigned, but a capital interest is retained, who declares the rental income?

Didn't find your answer?

This question is in relation to an assignment to an un-related third party, as part of a purchase of a property (i.e. not a transfer of income between spouses). My understanding is that if a person retains the legal ownership of the property, they are required to declare the rent as income, even if it has been assigned for a period of time to a third party. The payment to the third party is in lieu of payment for the purchase of the property. Full legal title to the property has transferred, but there is a charge on the property prohibiting transfer. My question is:

1) is it correct that the assignor still reports the rent as their income
2) is there an implied finance charge which can be deducted from the rental income as the structure is effectviely a financing arrangement

Thanks very much

Replies (3)

Please login or register to join the discussion.

avatar
By Justin Bryant
13th Sep 2018 10:28

This can get complex/messy re s809AZA ITA 2007 etc. and perhaps a licence or lease should be granted instead.

Thanks (0)
By SteveHa
13th Sep 2018 11:06

As I read it, the owner is using rental income to pay a debt to the third party, and simply employing a mechanism where payment is made directly.

In the circumstances, the income is still that of the owner.

Thanks (0)
avatar
By Tax Dragon
13th Sep 2018 17:28

1) I agree with SteLacca
2) (For tax purposes) Implied? No. Actual? You tell us.

Thanks (0)