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Edited version of your written advice
Authorisation Number: 1012880353331
Date of advice: 17 September 2015
Ruling
Subject: Assessability of lodging payments
Question
Is the payment you receive from the lodger staying in your home, assessable?
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 own your own home which is a X bedroom house.
You have made a private arrangement with a family friend who resides with you to pay basic board for shared living expenses.
They have their own room and share the facilities for the remainder of your residence.
They pay you $X per week to cover expenses such as food, gas, electricity, water and phone.
You make no financial gain from this arrangement.
Your friend is on a pension and has claimed rent assistance from Centrelink since the arrangement began in 200X.
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 circumstances of your case are very similar to those described in paragraph 18 of IT 2167. It is therefore concluded that the rent is not assessable income under section 6-5 of the ITAA 1997, because the payments by your lodger have been made in relation to a non-commercial or domestic arrangement.