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Edited version of private ruling
Authorisation Number: 1011730520407
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Ruling
Subject: Assessable income - payments for board
Question
Are the fortnightly payments you receive from a family member assessable income?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
A family member has moved in with you and your spouse.
The family member is paying you a fortnightly payment for board and lodging to cover expenses such as accommodation, food, electricity, water, washing of his clothes, transportation by car and other living costs.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes all ordinary income derived directly or indirectly from all sources.
Rental income is normally regarded as ordinary income and therefore forms part of the taxpayer's assessable income. However, where there is a non-commercial or domestic arrangement, amounts paid for board or lodging do not give rise to the derivation of assessable income (FC of T v. Groser 82 ATC 4478; 13 ATR 445).
Taxation Ruling IT 2167 considers the consequences of different rental income producing situations. Paragraph 17 of IT 2167 deals with payments by family members of an amount for board and lodging. It states that:
Arrangements of this nature, whether the payment is said to be for board only or for lodging only or for both, are considered to be in the nature of domestic arrangements not giving rise to the derivation of assessable income by the recipient of the payments. It follows that the question of income tax deductions for losses and outgoings does not arise.
The principles expressed in paragraph 17 of IT 2167 can be directly applied to your circumstance. It is considered that payments made by the family member for day-to-day living expenses such as food, electricity and other living costs are not assessable income under section 6-5 of the ITAA 1997, because the payments have been made in relation to a non-commercial or domestic arrangement which does not constitute assessable income to you. Consequently, any losses and outgoings that you incur in providing the board and lodgings are not allowable as tax deductions as no assessable income has been produced.
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