Edited version of your written advice

Authorisation Number: 1051195430888

Date of Advice: 24 February 2017

Ruling

Subject: Assessable income

Question

Is the remuneration payment you receive from the University for hosting international students assessable income?

Answer

No.

This ruling applies for the following periods:

30 June 2017

The scheme commences on:

1 July 2015

Relevant facts and circumstances

You host students via a homestay program.

These students pay an amount to the University for their accommodation.

The University then pays you remuneration for hosting the students.

You provide the students with their own room, all their food and you drive them to wherever they require.

The ATO contacted accommodation services at the University.

The University advised that they treat the arrangement with the hosts as a contractor arrangement and provide documentation when payments are forwarded to the host.

The University does not provided yearly payment summaries to the host.

The amount of remuneration paid to hosts depends on the model that students have chosen.

Relevant legislative provisions

Income Tax Assessment Act 1997 ITAA 1997 subsection 6-5(1)

Reasons for decision

Assessable income

Under subsection 6-5(1) of the Income Tax Assessment Act 1997, your assessable income includes ordinary income. Ordinary income has generally been held to include income from rendering personal services, income from property and income from carrying on a business.

Income Tax Ruling IT 2167 Income Tax: rental properties - non-economic rental, holiday home, share of residence, etc. cases, family trust cases provides guidelines about rental properties and discusses when rental income is regarded as assessable income. Where you rent out your property or part of your property, the rental income is normally regarded as ordinary income and therefore part of your assessable income.

However, as highlighted in paragraph 17 of IT 2167, where there is a non-commercial arrangement and where a payment is received for board only or for lodging only or for both then the income is considered to be a domestic arrangement not giving rise to assessable income. It follows that the question of income tax deductions for losses and outgoings does not arise.

When using your home for homestay students, the essential question is whether the arrangements are consistent with normal commercial practices. If an amount received from a homestay student is not a commercial arrangement, then the payments for board are not regarded as assessable income.

In determining whether a particular receipt is income, consideration needs to be given as to whether the intention of providing the accommodation is to make a profit or a genuine commercial relationship exists between the parties. Where these factors exist it can be argued that such receipts are in the character of assessable income (FC of T v Kowal 84 ATC 4001). However, the receipts will not be considered assessable if they merely defray the cost in looking after the students (FC of T v Groser 82 ATC 4478). In such cases, there is generally no gain or benefit to the home owner. Therefore, it is not reasonably arguable that they had a profit making intention.

In your case, you have homestay students staying with you. You receive an amount which will cover their accommodation, utility, food and travel expenses. The amount is based on the homestay organisation rate. This rate is regarded as a contribution to the cost of accommodating the students in your home.

It is considered that the payments and arrangement are not commercial in nature. Therefore, the payments are not considered to be assessable income. It follows that no deduction is allowed for any of the associated costs.

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