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Edited version of your private ruling
Authorisation Number: 1012469984278
Ruling
Subject: Assessable income - board and lodging
Question 1
Are the payments you receive for board and lodging assessable income?
Answer
No
This ruling applies for the following period
Year ended 30 June 2013
The scheme commences on
1 July 2012
Relevant facts and circumstances
You rent part of your principal place of residence.
You will be hosting a student boarder who will pay you an amount for board and lodging.
You will provide accommodation, food and cleaning.
The payments you receive from the boarder, who is a family friend, will not be at a commercial rate.
Relevant legislative provisions
Income Tax Assessment Act 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 82 ATC 4478; 13 ATR 445).
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.'
Amounts received as board and lodging are generally to assist with the cost of utilities and food and drink. The amount of board charged generally has no relation to any commercial rate of rental, and is not intended to convey a financial benefit to the host. While there might be some surplus on occasions to the host, these amounts will generally be small having regard to the expenditure incurred.
The amounts you receive as board and lodging are made in relation to a non-commercial or domestic arrangement and are therefore not assessable income under section 6-5 of the ITAA 1997.