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Ruling
Subject: Home-stay income
Question
Are amounts received for boarding students under a home-stay arrangement included in your assessable income?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
1 July 2010
Relevant facts
You provide home-stay to international students.
These students are allocated through the universities and college schools that they attend.
You host two to three students from various educational institutions when required. However, there are times when there is an overlap between one student leaving and another one coming to stay.
The length of stay of these students varies and they can provide two weeks notice to leave.
You are either paid directly by the students or by the educational institution.
The home-stay payments are set by the education providers and are to cover all the expenses of the students staying.
You do not make a profit from the arrangement.
Relevant legislative provisions
Tax Assessment Act 1997 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 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 received amounts under a home-stay arrangement to cover the expenses of accommodating students in your home. The amount of the payment is set by the education providers to pay for all household expenses of the student.
In your case, rates are not regarded as true commercial rates. There is no built-in benefit component to you for the use of part of your home. You do not make a profit from the arrangement.
Therefore, the amounts you receive are made in relation to a non-commercial or domestic arrangement and are not included in your assessable income under section 6-5 of the ITAA 1997.