The situation is that an adult child (I'll call Mary) and their spouse (I'll call Fred) are living with and caring for an aged parent (I'll call Linda) in a home owned by the aged parent. Mary contributes to the household expenses by reimbursing Linda for Mary's share of expenses. Mary does not pay rent. Mary receives a carer's allowance from Centrelink.
Advice was given to Mary that she could claim rent assistance from Centrelink for the reimbursement of Linda's household expenses. It was explained to Centrelink that the only payments made were for reimbursement of Mary's share of household expenses. Centrelink advised that this was classed as rent for the purposes of rental assistance and that a Rent Certificate will need to be completed.
Linda calculated the average reimbursement amount per fortnight and this was included as the rent amount. The Rent Certificate was completed and Linda signed it as the landlord. By signing as the landlord, Linda was effectively saying that rent was being charged when it wasn't actually rent, but reimbursement of household expenses. In addtion by signing Linda also acknowledged that information provided can be verified with the Australian Taxation Office. Linda did not declare any rent on her tax return.
Mary received the rental assistance. This has continued for a few years. Apparentlu Centrelink never verified the information with the Australian Taxation Office.
Linda's health deteriorated and her power of attourney (I'll call George) has taken over her finances. George was asked to sign a renewal of the Centrelink Rent Certificate on behalf of Linda, but did not feel comfortable signing that Linda was receiving rent, even though Linda had signed the Rent Certificate before. George followed this up with Mary, who followed it up with Centrelink. The result was that Mary's Centrelink file was changed from rent to board and that Mary would not need to repay any rental assistance which she had received.
Is Linda liable for not declaring any rental income on her previous tax returns? Does signing the Centrelink Rent Certificate as the landlord provide proof that rental income should be declared on the landlord's tax return?
Thanks, PRB.
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