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Edited version of your written advice
Authorisation Number: 1012725292966
Ruling
Subject: Rent from boarders
Question
Are you assessable on the income you receive from having boarders?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2015
Year ended 30 June 2016
The scheme commenced on
1 July 2014
Relevant facts
You have a couple who intend boarding with you who will pay you a weekly amount.
The board will cover utilities, laundry detergents and toilet paper, basic food and some meals. You will also loan them a car.
They will have a furnished room and access to all common areas.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 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 Income Tax: rental properties - non-economic rental, holiday home, share of residence, etc. cases, family trust cases 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 will board a couple in your home. You will provide a room which is furnished. The couple can use all common areas of the house. You charge them an amount per week for board and expenses. There would be a negligible surplus after you paid for expenses.
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.