All Topics / Help Needed! / Board/Rent – Do I have to pay tax?

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  • Profile photo of Benjamin CsikosBenjamin Csikos
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    @benjamin-csikos
    Join Date: 2010
    Post Count: 114

    I've built a house in hillcrest that is a little unique.  My side of the house is a 3 bedroom 1 bathroom, and then I have the laundry that has a door on both sides of it, and as you step through the laundry, you walk into a 2 bedroom 1 bathroom little unit with a 'kitchen' of it's own. It's a shneaky idea because essentially my house is really just a 5 bedroom house with a kitchen and a 'wet bar', but the moment I lock the laundry door, I can completely separate the two sections. It's wonderfully sound proofed all the way through aswell so I don't hear a thing.

    I have 'rented' out the 2 bedrooms on the one side of my house for $300 p/w. They are technically living under the same roof as me, though it doesn't feel like it. What's the tax situation with this idea? Do I need to declare what they pay to live there?

    To go a little deeper, on my side, I have rented out one bedroom to my brothers, wives, brother. Essentially, he pays board as the price includes food costs. We shop and cook for him aswell.

    Do I have to pay tax on any of this? Does it count as income, or does board not count?

    All three tenants (2 in the unit, one in my side) have put on their dole forms that they pay a certain amount of rent to me each week.

    I just want to make sure I'm being smart, but legal at the same time.

    Profile photo of Paul DobsonPaul Dobson
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    @pauldobson
    Join Date: 2003
    Post Count: 1,196

    G'day Benjamin

    I'd declare it all on your tax return.  Your accountant should be able to work out some reasonable deductions for the unit and also have a formula that the ATO accepts for "full" boarders.

    Cheers,  Paul

    Paul Dobson | Vendor Finance Institute
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    An alternative way to finance your home.

    Profile photo of scotonlinescotonline
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    @scotonline
    Join Date: 2010
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    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    board is exempt from tax, but what you have described isn't really board – this is just receiving money to pay for costs such as food and electricity usage.

    Also there are CGT implications. If you rent out part of your main residence then you will have to pay CGT on this portion when you sell.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Benjamin CsikosBenjamin Csikos
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    @benjamin-csikos
    Join Date: 2010
    Post Count: 114

    Yes, but since this is all technically under the same roof (it’s a five bedroom house that has a convenient door in the middle) would it not all pass as board?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Not if the 'boarders' were being charged more than the costs.

    There are some rulings etc on the ATO site about this. I have some references, but ain't home at the moment.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of Benjamin CsikosBenjamin Csikos
    Participant
    @benjamin-csikos
    Join Date: 2010
    Post Count: 114

    How do you define what the costs are? You mean, They don't pay to live there, merely they pay the food bill?

    Im confused.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    going from memory, board is just reimbursements for expenses such as food, water, electricty etc.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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