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Edited version of private advice
Authorisation Number: 1052134487195
Date of advice: 6 July 2023
Ruling
Subject: Trust - assessable income
Question
Is the money received for the boarding arrangement between related parties considered assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
No. The money received from related parties is not considered to be assessable income under section 6-5 of the ITAA 1997. The arrangement is of a domestic nature to provide housing for family members. The arrangement is not consistent with normal commercial practices and is for less than commercial rent.
This ruling applies for the following periods:
Year ended 30 June 2019
Year ended 30 June 2020
Year ended 30 June 2021
Year ended 30 June 2022
The scheme commenced on:
1 October 2017
Relevant facts and circumstances
The Trust was established on a specified date.
The trustee is a company with a sole director and shareholder.
The trust beneficiaries include five family members including the sole director.
The family trust owns a property which was acquired on a specified date.
The property was purchased with the intention to ensure the directors parents could have a place to live in retirement as they are unable to afford rent on their own.
The parents of the director have since separated and the property is currently being used by one of the parents and the child of the sole director.
The mother pays a rent of a specified amount per week to cover the outgoings of the property and the child pays a specified amount per week to help with additional running costs such as electricity, internet and water. The director covers costs such as maintenance, repairs, council rates, and water.
You received a rental appraisal of the estimated rent.
The trustee understands they could rent this to an unrelated party on commercial terms for a higher return on investment however the intention is to provide a living arrangement for family members.
You have no formal tenancy agreement as you felt it was not needed.
The financial statements were provided for earlier financial years as well as projections for the current financial year showing the property is being rented at a loss.
You provided records showing that the utilities bills are in the name of the parent starting on a specified date.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5/p>