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Edited version of private ruling
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Ruling
Subject: Rental income
Are the lodging payments you receive from your close family relatives assessable income?
No.
This ruling applies for the following period
Year ending 30 June 2014
The scheme commenced on
1 July 2010
Relevant facts and circumstances
You and your spouse own and live in a property with your children.
Close family relatives, who receive government benefits, have since moved in to live with you.
You receive lodging payments from your close family relatives, which varies up to a certain amount each fortnight.
The utility and food expenses are shared by everyone in the household.
You do not make a gain from this arrangement.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our 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 regarded as ordinary income and therefore, forms part of a 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; (1982) 13 ATR 445).
Taxation Ruling IT 2167 considers the consequences of payments by family members of an amount for board and lodging. Paragraph 17 of IT 2167 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 rise.
You receive payments for lodgings from your close family relatives. We consider that the payments are in relation to a domestic arrangement rather than a commercial transaction. Therefore, these payments are not considered to be assessable income under section 6-5 of the ITAA 1997 and any losses or outgoings are not deductible.