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Edited version of your private ruling
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Ruling
Subject: Assessable income - board
Question
Are the payments you receive from boarders assessable income?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 2011
Year ending 30 June 2012
The scheme commenced on:
1 July 2010
Relevant facts and circumstances
You are renting out a property from a real estate agent.
You are the only person on the lease for the house.
Your relative began staying in a spare room of the house. She pays you an amount per week which covers utilities and some food.
A relative of your relative moved into another spare room of the house. He pays you an amount per week which covers utilities and some food.
There is no formal agreement between you and the two boarders; you state that you are just supporting family.
You do not make any money from the arrangement; the money goes towards sharing the cost of the rent and the extra utilities. You are not even sure if the payments you receive cover their share of these costs.
At times where they return to their home for holidays or are otherwise not staying at your residence for extended periods, you generally do not ask them to pay you.
If they miss paying you some weeks, you sometimes do not follow them up as they are struggling students.
Although they are not on the lease agreement between you and your real estate, your real estate agent is aware that they are living with you.
Relevant legislative provisions
Income Tax Assessment Act 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.
In your case you receive a weekly payment from two relatives that live with you. The payments you receive go towards paying the rent, utilities and food expenses. You do not receive any benefit from the payments. The fact that you are not the owner of the property does not alter the nature of the arrangement.
The amounts received by you are made in relation to a non-commercial or domestic arrangement and are therefore not assessable income under section 6-5 of the ITAA 1997.
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