Hi. Can anyone tell me if they have bought an investment property and rented it to a family member and if the ATO is happy abt it? Daughter lives interstate from parents. Thanks so much in advance for any help you can give me. 
LindaActTodayParticipant@acttodayJoin Date: 2003Post Count: 232
I can see no problems at all in renting to your daughter. To safeguard, prepare a lease agreement, lodge rental bond to keep it all above board and bank the rents. I think the rent would need to be a fair rent, not too cheap but otherwise nothing different than renting to an unknown.
If I knew then what I know now……….you know how it goesmelbearMember@melbearJoin Date: 2003Post Count: 2,429
As ActToday suggested, the ATO doesn’t have a problem UNLESS it’s well below market rent, and therefore the property is negatively geared, with the consequent tax deductions. If rent is ‘close’ to fair market value, then it’s not usually a problem, even if the property is then -ve.
MelTerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
I would rent to her at a lowish rent. To support yourself in case of an audit, keep cuttings from a for rent section of a newspaper, or an agents rental list to show that it is market rent.
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Thanks AcToday, Mel and Terry for your replies. They were very helpful.jancrowsMember@jancrowsJoin Date: 2003Post Count: 122
It is a good idea to have all the formalities in place when renting from/to family or friends which has been mentioned. The third party intervention is a real godsend if there are issues.
There are Property Managers that will provide you with a written appraisal on market rent of the property (in a range).
This can provide you with the option to select the bottom of the range price to rent to your daughter or thereabouts.( great for Tax purposes )
You can negotiate the %fees & letting fee on a property as well.
I rented one from my parents (Their IP ) a few years back and I/they maintained a 3rd party Property Manager throughout the rental period. My sister also rented the property for a period under the same arrangement recently. We paid the lower end of the rent range but everything was alot more comfortable for each of the parties. They also live interstate.
We had a Tenancy Agreement, Standard Bond, Property Condition Report & Regular Inspections.(the usual things).
It can be the simple things that can tear apart families and friends and you cant put $ savings on that !!
Just a thought.
“Do not follow where the path may lead. Go instead where there is no path and leave a trail” Ralph Waldo EmersonelvesMember@elvesJoin Date: 2003Post Count: 507
I rent two properties to my family, all at market rents, where they would not have been able to get rental accom. By doing this, I provide them with a rental agreement, a lease, no bond, and a property report. The money is banked directly into a bank account so there is always proof and records.
For those on benefits, centrelink require a copy of a lease usually and I have had to complete forms with details twice for one party and not for the other.
My properties grow and at this time are looked after, but I also have landlord insurance to cover me. I do not pay an agent, but in some cases I would advise this to remove yourself from the emotional issues that can arise.
My family know I am hard but fair, there are no ifs or buts about rent, pay it or suffer the consequences.
I also rent with an agent to other people who are not tenants.
AS for my family, paying regular rent and being “in the market” gives them some rating for any further possible moves.
Thank you Jancrow and elves for your input as well. Will certainly take everyone’s advice.Still in SchoolMember@still-in-schoolJoin Date: 2003Post Count: 1,844
Anyone can rent your property, even you can rent the property to yourself if it was structured in a trust.
When ever renting to a family, ensure that the correct legal process is in place, best to have a third party such as a real estate agent to handle and distribute the rental to you. Or still you can setup an Escrow Trust, though this is doing it privately and is probably more costly to setup, unless your are dealing with commercial property, then it would be visable to do so.
sisJetDollarsParticipant@jetdollarsJoin Date: 2003Post Count: 2,435
Currently I am renting from my Sister-in-law living only 15 house away from me. I pay rent at market price to the real estate agent. This way the ATO won’t think I do illegal thing.
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