Private ruling: Income - Home stay arrangements
Published: October 2012
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2010

Ruling: Q1: Are the payments made to you by student lodgers in respect of accommodation, food and other expenses assessable income? | A1: No

Relevant facts and circumstances: You have been providing accommodation to students for several years. You have a number of students at any one time who are with you for periods of months The current payment is set by an agency and you receive an amount per week from each student. This payment covers the room, three meals per day, electricity, gas, water, any breakages and sometimes laundering of their clothes. The amount you receive basically covers the expenses of having the students stay with you.

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 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.' In your case, the amounts you receive are made in relation to a non-commercial or domestic arrangement. The amounts are set with regard to the normal cost of supplying food, utilities and overheads for the students. These rates are not regarded as true commercial rates and there is no built-in benefit component to you for the use of parts of your house. It is therefore not assessable income under section 6-5 of the ITAA 1997. Consequently, no expenditure incurred in earning that income is deductible.

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