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Edited version of your written advice
Authorisation Number: 1051367805902
Date of advice: 2 May 2018
Ruling
Subject: Rental - income - boarder - non-commercial arrangement
Question
Are the payments you received from renting a room of your property assessable income?
Answer
No
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
Year ended 30 June 20XX
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You received money from friends who had unrestricted use of a bedroom, main bathroom and second toilet in a 3 bedroom home.
The friends had access to all general living areas.
The costs of electricity, gas, water use, home telephone and internet were shared equally. The cost of a cleaner, household cleaning products, common food items, new kitchen equipment and utensils were shared.
These costs were in additional to their board. Living costs such as food were kept separate.
Council and water rates, insurance, repairs and property maintenance were not shared.
Mortgage repayments were made by the taxpayer only.
The taxpayer did not make any claims for general depreciation or capital allowance.
There was no written tenancy agreement, no bond and there was an understanding that the friends could leave at any time, without financial repercussions.
The bedrooms were never advertised for rent.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 6-5(2)
Income Tax Assessment Act 1997 section 8-1
Reasons for decision
Taxation Ruling IT 2167 Income Tax: rental properties - non-economic rental, holiday home, share of residence, etc. cases, family trust cases provides guidelines in determining the authenticity or otherwise of rental arrangements, the assessability of receipts derived from various rental arrangements and the deductibility of expenses incurred in connection with a property where the arrangement is not one that is affected at arm’s length.
In your situation, the payments you received from your friends are not considered to be assessable rental income since it was a non-arm’s length transaction and were not at a commercial rate of rent.
Therefore, the payments received from your friends are not assessable income. In addition, as the arrangement was private in nature, no deductions are allowable under section 8-1 of the ITAA 1997 in respect of losses or outgoings incurred in connection with the property.