Private ruling: Rental - Income
Published: July 2013
Ruling period: § Year ended 30 June 2012 | § Year ended 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Is rental income received from boarders at your home assessable income? | A1: Yes.

Relevant facts and circumstances: You own a property with a spare room. You conducted research with a real estate agent to establish the market rate of renting the area to the general public. You rented the space to an individual for a market rate. The individual also contributed to the household running costs.

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 provides that the assessable income of an Australian resident includes all ordinary income derived directly or indirectly from all sources. The Commissioner provides guidance on the issue of letting property to relatives at paragraphs 13 to 16 of Taxation Ruling IT 2167. Where property is let to relatives the essential question is whether the arrangements are consistent with normal commercial practices. If they are, the owner of the property would be treated no differently (for income tax purposes) from any other owner in a comparable arms length situation. Although this ruling discusses letting property to relatives, the principles established can be applied to your situation. In your case you rented a part of your property to non-related parties at a commercial rate, and received payments on a weekly basis. In view of the principles identified in IT 2167, your arrangement is comparable to that of an arms length situation and consistent with normal commercial practices. As such, the rental income you receive is considered income according to ordinary concepts and is therefore assessable.