Under Australian tax law, to be eligible to claim any outgoing costs you must receive income on the property. So, if you’re not collecting rent from a relative who is occupying the property, you’re not entitled for any tax deductions. And since interest is usually the biggest cost factor, it’s wise to have a low – or no mortgage – on your property, especially when you receive low or no income from the property.

     If your family members are paying tenants, the Australian Tax Office requires you to declare the true market value of the rental property as income, regardless of what you may decide to charge. So, if the rental is A$100 per week and the true market value is higher, you’ll have to declare the higher income to be eligible to claim any interest or other property costs. The true market value of your property can be determined by a Real Estate Agent.

     Once you’ve established what the true market rental is and the total cost of ownership, it’s worth declaring the property in your tax return only if the costs are greater than the market rental. If it’s less, it’s best to leave the property out of your tax return altogether and treat it as a family arrangement. Regardless of which path you choose, your property will still be subject to Capital Gains Tax upon sale. And if the property is genuinely your parents or relatives’ home, it’s best to transfer the property into their name and make it their principle place of residence. They will then be eligible for the Australian Capital Gains Tax-Free Status. Your decision will be based on a number of factors, so take into consideration level of debt, availability of finance, type of property and family obligation.