Private ruling: Income and expenses from flat mate
Published: October 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you required to declare the amounts received from your friend? | A1: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 6-5(1) | Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: Subsection 6-5(1) of the Income Tax Assessment Act 1997 provides that the assessable income of a taxpayer includes income according to ordinary concepts. 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 does not give rise to the derivation of assessable income ( FC of T v. Groser 82 ATC 4478; 13 ATR 445). Where an amount received from renting is below what a person in the same situation could receive for a property in a normal commercial arrangement, the reason for that discrepancy needs to be examined. You estimate that you could rent your property out for in excess of $xxx per week and you charge your friend $yyy per week for the use of approximately half of the property. Taxation Ruling IT 2167 Income Tax: rental properties - non-economic rental, holiday home, share of residence, etc. cases, family trust cases , examines the situation where a property is let in a non-arms-length transaction. Where the rent payment received amounts to a contribution to expenses, and is not considered as a reward to the home owner but is instead a private arrangement, the rent is not considered assessable income. In your case, the amount you receive is a contribution to assist you with your mortgage payments. Your arrangement is considered to be a non-commercial arrangement as the amount charged is considerably less than what a person would charge in a normal commercial arrangement. As your arrangement is considered to be non-commercial, you are not required to declare the amount you receive. Likewise, any expenses you incur are also not deductible.

Relevant facts: You have built a home and have taken in a friend who pays you a weekly amount towards the mortgage. | Your friend has exclusive use of a bedroom and bathroom and you share the rest of the home. | Your friend also pays half of the power but does not contribute to the rates. | You estimate that if you rented the whole house out, you could get rent of approximately three times the amount you receive from your friend.