Private ruling: Rental property income
Published: September 2013
Ruling period: Year ending 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Is a payment received from a family member who resides with you as "board and lodging" considered assessable income? | A1: No

Relevant facts and circumstances: You intend to purchase a property which will be your main residence. You intend to share the residence with a family member, who will pay you an amount for board and lodging to assist with household expenses such as mortgage repayments.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5

Reasons for decision: Summary: 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 17 of IT 2167 states that: 17. Arrangements of this nature, whether the payment is said to be for board only or for lodging only or for both, are considered to be in the nature of domestic arrangements not giving rise to the derivation of assessable income by the recipient of the payments. It follows that the question of income tax deductions for losses and outgoings does not arise. Amounts received as board and lodgings are generally to assist with the cost of household expenses. The amount of board charged generally has no relation to any commercial rate of rental, and is not intended to convey a financial benefit to the host. While there might be some surplus on occasions to the host, these amounts will generally be small having regard to the expenditure incurred. In your case, the amounts you receive as board and lodging 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. Please note that as these amounts are not considered assessable income, you cannot claim a deduction for any associated costs such as utilities or mortgage repayments.