Rent Collection & Ownership

Hayden Pennyfeather

If you own a property that is being rented out, can you allow someone else to manage the property collect full payment of the rent, without it being considered as part of the owners taxable income?

Hayden Pennyfeather

OSI wrote: »

If they're collecting the rent on your behalf, then obviously it is taxable income.

Sorry, this isn't clear from my post. I mean that they are being paid the rent, rather than just collecting it on the owners behalf.

The_Conductor

Hayden Pennyfeather wrote: »

Sorry, this isn't clear from my post. I mean that they are being paid the rent, rather than just collecting it on the owners behalf.

Sure- that's how most managing agents work- the tenant pays them the rent, the agent takes their cut (10% or whatever) and any deductions for works needed in the preceding 30 days (plumber, gas, electrician callouts, white good replacements etc)- and deposits the balance with the landlord.

I.e. they are collecting the rent- and managing the tenancy- and giving the landlord the net income after day-to-day and management agent deductions.

The way you've phrased it is open to interpretation in many ways- however, while an managing agent is collecting money from a tenant, it is the landlord's rent- and the agent is acting on your behalf- it is not that the agent is collecting rent other than on your behalf (and any suggestion of otherwise- would be tax evasion- which obviously, is illegal).

DubCount

If an agent collects rent and passes it (or part of it) on to the property owner, then the property owner is liable for tax on the income that is passed on. The agent is liable to income tax on the proportion of the rent that is not passed on.

Just a note if OP is considering allowing the agent to hold onto all of the rent. In this case, the property owner has no income to tax. However, the agent would be deemed to have received a gift from the property owner in the form of the free use of the property, so the agent would be liable to income tax and Capital Acquisition Tax (Gift Tax) in this case.

The_Conductor

Edit- if they are collecting the rent- for themselves- rather than for the agent (if this is what you mean)- they are being gifted the rent by the owner.

The owner has to declare the gross rental income and pay the tax due.
The owner then gifts the agent the net (after tax) rental income.
The agent in turn, declares the 'gift' and subject to limits (depending on the relationship the recipient has to the owner of the property)- pays the tax due on the gift.

Someone cannot collect the rent from a property that someone else owns- for themselves- without triggering due tax for the property owner- and the person collecting the rent- separately.

No- is the short and simple answer to your question- you can't do it.

Michael D Not Higgins

Hayden Pennyfeather wrote: »

Sorry, this isn't clear from my post. I mean that they are being paid the rent, rather than just collecting it on the owners behalf.

If they become the beneficiary of the rental income that could get messy tax-wise. Speak to a professional.

The_Pretender

I'm assuming OP means letting someone else rent out that OP owns and keeping the money. In which case it would be seen as you gifting the rental income to that person and they would be liable to pay tax on it.

Schrodingercat

Are Agent fees not tax deductible?
So could you have an "agent" who charges "management fees" equal to the amount of rent, and that would be what you are looking at ?
You declare the income on the rent, and then declare the expense of the agent so you have a taxable income of 0.


You would still need to pay property tax yourself, and that isn't tax deductible.


Murky bit. The agent could "gift" you the amount to pay the property tax once it is under 3k a year and that would be tax free and you could use it to pay property tax.
"Agent" has to pay their taxes on income, so the government is still getting the same amount (and they will have paid tax on the income they are using to gift to you).


I'm not an accountant or anything like that, so I could be completely wrong and that could be dodgy as hell.

The_Conductor

Ok guys- I'm closing this down here- as its entering dodgy territory.

OP- go get proper tax advice- questions like this- which sound like you're trying to skirt paying tax- are not acceptable in this forum.