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Edited version of your private ruling
Authorisation Number: 1012599058661
Ruling
Subject: Homestay Arrangement
Question
Is your income derived from a private homestay agreement assessable income?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
Year ended 30 June 2018
The scheme commences on:
1 July 2013
Relevant facts and circumstances
You have previously been involved in homestay arrangements with accommodation bodies.
In the past your homestay agreements have been arranged and completed by an accommodation body.
You intend to arrange homestay arrangements in the future where the agreement is arranged between yourself and the student.
The homestay arrangement would involve regional, interstate or international students interested in the homestay experience.
You will only board one or two students at any time.
Under a homestay arrangement you will treat the students as guests, share customs and assist with the practicalities of living away from home.
Your homestay arrangement may also include meals.
As part of the homestay arrangement students will be required to pay board to offset the household expenses and overheads associated with hosting the student.
You intend to abide by the homestay guidelines and fees as set by an accommodation body.
Relevant legislative provisions
Income 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 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.
The term 'homestay' is used to describe accommodation provided to local and overseas students studying or training at Australian universities or other educational institutions.
Under a homestay arrangement, students live with the host family in their home. They are usually provided with their own room and have access to other household facilities. Main meals are provided by the host family. They may also have their laundry and ironing done, and provided with occasional transport. They may be required to help out with household chores and keep their room clean.
Amounts received under the homestay arrangement are determined by the educational institution to cover the expenses of accommodating the student in the home. The amount of the payment is set with regard to the normal cost of supplying food, utilities and overheads for the student. This rate is not regarded as true commercial rates and there is no built in benefit component to the taxpayer for the use of parts of the house. While there might be some surplus on occasions to the home owner, these amounts will generally be small having regard to the expenditure incurred.
The circumstances described in your case are very similar to those of other homestay arrangements outlined above. Although your homestay arrangement has not been administered by an accommodation body the details of your homestay arrangement are very much the same. You do not expect to have any surplus money left over from the homestay payments that will be received for the boarders staying with you.
Therefore the payments you receive for your boarders are a non-commercial or domestic arrangement and consequently these amounts are not assessable income under section 6-5 of the ITAA 1997.