Hi, I am just wondering if anyone knew where we stand with tax etc when renting to family if we dont charge market value rent?
Also how do we work out what market value is?
thanksSecond question first. You can get rent sheets from the local real estate agents find out what something similar is renting out for. Or get 2 or 3 property managers to go through for a rental assessment. If they know they're not the only ones offering an assessment they won't be too surprised when you don't call them back.
Not being an accountant I can't comment on the tax or accounting standing on renting to family, but I rent 2 of my properties to family at "mates rates".
This in some instances is not a lot different to having rented to long term tenants where their rent hasn't leaped ahead in pace with the market rates, and they're renting at less than market value. If they're good long term tenants I sometimes have kept them at a slightly less than market rent ($5 to $10 a week) to encourage them not to look elsewhere.
Hope this helps.Thank you Mckero
I think you may not be able to claim anything at all if you are not getting a commercial rent – you won't be able to justify the deduction.
A way around it is to 'charge' them normal and and then gift them back the extra. Or, depending on their situation, pay them for doing maintenance on the place.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
As Terry mentioned as long as the rent is a Commercial rent then you will be fine.
The question on what is market rent will differ from tenant to tenant and landlord to landlord.
If you were using a managing agent you would factor in their costs and charges to the rent.
The same would apply if you were paying for the gardens to be mainained when it should be the Tenants responsibility.Renting to family members you might decide that Landlords insurance was not necessary and therefore prepared to take a lower rent that normal due to the reduced risk.
All i am saying is you cant give it away.
Richard Taylor | Australia's leading private lender
Hi Molleye6, To answer your queries – market value is worked out using available data in the current market place. Usually the most efficient way is to take the average of 3/4 written rental appraisals from local agents. The ATO clearly states that should non commercial values be charged – an apportionment of expenses will also need to be made. It doesnt matter if you use an agent or don't take up insurance or garden maintenance expenses. Main factor revolves around income/rent charged. If you knowingly receive below market/commercial rates – you will need to apply the same proportion down towards your expenses. If you'd like more help with this subject please feel free to email us for more clarification – [email protected]
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