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Edited version of your private ruling
Authorisation Number: 1012561692506
Ruling
Subject: Rental - Income
Question
Are the payments you receive for board and lodging assessable income?
Answer
No.
This ruling applies for the following period(s)
Year ended 30 June 2014
The scheme commences on
1 July 2013
Relevant facts and circumstances
You and relative one own a property which has a Granny flat attached to it.
The Granny flat can only be occupied by family as stipulated in the title notification.
Relative two and relative three live in the Granny flat.
You and relative one cover the costs of electricity, water and maintenance while relative two and relative three contribute $X a week.
The commercial rate is between $Y and $Z a week.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
Income Tax Assessment Act 1997 Section 8-1.
Reasons for decision
Under subsection 6-5(1) of the Income Tax Assessment Act 1997, assessable income includes income according to ordinary concepts.
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 assessability of payments for board and lodging paid by family members and states:
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 or outgoings does not arise.
In your case, we consider that the payments you receive are in relation to a domestic or social arrangement rather than a commercial transaction. Consequently, they are not included in your assessable income. Any losses or outgoings that you incur are not allowable as tax deductions under section 8-1 of the ITAA 1997 because no assessable income has been produced. This is also confirmed by paragraph 17 of IT 2167.
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