Private ruling: Boarding income
Published: June 2012
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Are amounts received by you for boarding a family included in your assessable income? | A1: No.

Relevant facts and circumstances: You have a family staying with you in your home. They pay you a flat amount per week for their board, which includes the use of the house, swimming pool and yard area with the exception of your own bedroom and separate toilet. You calculated the amount of board charged on the actual costs of some food, firewood, swimming pool maintenance, council rates and other maintenance. The family does not share all of the food with you as you have some specific food requirements. The electricity connection is in the name of the boarding family, as they had entered into a supply contract with an electricity provider which is binding no matter where the residence is. You pay an amount for your own electricity usage to the boarders, based on your previous private electricity usage. Your motivation for having boarders is mainly for the company and security as you live on an isolated property. The motivation for the boarders was the low cost of their board, which suited their large family, and you consider that they would not get the same type of board at this cost in another situation. You do not make any financial gain from the arrangement, and if there is any period when your board received exceeds expenses, then this is usually reversed in the following period, so that over time you are not in a surplus income situation.

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 13 ATC 445; (1982) 65 FLR 121; 82 ATC 4478). 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, you receive an amount under a boarding arrangement to cover the expenses of accommodating a family in your home. The amount of the payment is calculated to cover the costs of some food, firewood, maintenance and council rates. This amount is not regarded as a true commercial rate, and there is no built in benefit component to you for the use of part of your home. You do not make a profit from the arrangement. It is considered that the amounts you receive are made in relation to a non-commercial or domestic arrangement and are not included in your assessable income under section 6-5 of the ITAA 1997.

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