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Edited version of private ruling
Authorisation Number: 1011783833251
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Ruling
Subject: Assessability of boarding income
Question:
Is the income you derive from a boarder in your home assessable?
Answer:
No
This ruling applies for the following period
Year ending 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You have a friend whose family home is interstate. Your friend is a student and they contribute an amount per week towards household expenses. This amount covers the provision of their own bedroom, access to the fully furnished house, electricity and internet connection to the house.
Food is not included as you have different preferences and eat at different times.
The amount of board was based on the cost of a similar unfurnished house. However the amount for your boarder covers additional expenses such as electricity and internet connection and the house is fully furnished.
You have stated that you have undertaken the arrangement to help out a friend and that the weekly boarding fee is a contribution towards the expenses of having a boarder.
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 13 ATC 445; (1982) 65 FLR 121; 82 ATC 4478).
Taxation Ruling IT 2167 considers the consequences of different rental income producing situations. Paragraph 18 of IT 2167 states that:
Situations arise where the owner of a residence permits persons to share the residence on the basis that all the occupants, including the owner, bear an appropriate proportion of the costs actually incurred on food, electricity etc. Arrangements of this nature are not considered to confer any benefit on the owner. There is no assessable income and the question of allowable deductions does not arise.
In your case, you currently board a student in your home. The student has their own bedroom in the fully furnished house. The student can use all other areas of the house and the board amount contributes to expenses for electricity and internet connection.
The amount you charge is not considered to be a commercial rate as there is no built in benefit component to you for the use of part of your home.
Therefore, the boarding arrangement is considered to be a non-commercial or domestic arrangement. The board amounts you receive are not included in your assessable income under section 6-5 of the ITAA 1997.