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Edited version of your written advice
Authorisation Number: 1012921021094
Date of advice: 4 December 2015
Ruling
Subject: Homestay payments
Question
Are the payments you receive under a homestay arrangement assessable income?
Answer
No.
This ruling applies for the following periods:
Year ending 30 June 2016
The scheme commenced on:
1 July 2015
Relevant facts and circumstances
You provide accommodation in your home under a homestay program for overseas students studying a subject.
You accommodate from one to three students at any one time.
The period of stays varies between one week and three months.
You are paid an amount per week per student.
This payment is for full board and lodgings, including use of a bedroom, food, Wi-Fi, cleaning and electricity.
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.
While the Commissioner considers the hosting of several students at any one time may be considered a business activity, for example: operating a boarding house, this will depend on the circumstances of each case.
In your case, it is not considered that you are in a profit making arrangement and the nature of your activity is not considered a business. The amounts received by you 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.