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Re: Does rental of room to family member class as earning income

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My elderly parent lives with me in my home and has full access to all facilities of the home - and pays me $300 per week, with this money used towards the usual household running costs. Centrelink appears to class this as paying rent and my parent and I are required to complete a Centrelink form - a Rent Certificate - that indicates that I am a landlord or rent collector. (I will be following this up with Centrelink to ascertain if this arrangement is actually classed as payment of rent for their purposes of assessing my parent as eligible for rent assistance/supplement to the aged pension). 

 

If this is classed as rent, will I need to declare this as income for taxation assessment purposes?

 

I receive a fortnightly pension stream via my superannuation fund, and I have no income apart from that and interest earned from bank accounts.  

 

Based on interest from my bank savings deposits in the last year, if a similar rate of interest was earned in the current financial year, and if the $300.00 per week paid to me by my parent is classed as rental income, I may be in the tax bracket required to pay 19c for each $1.00 over $18,200.

 

Any clarification welcomed, about whether the $300/week paid to me would be classed as income from rent.

 

Thank you.

 

 

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ATO Certified

Community Support

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Hi @kla_24,

 

Welcome to our Community!

 

Generally speaking, if you're renting part of your home to family members the rent needs to be at a normal commercial rate. Any expense you claim can only relate to the part of the house that is being rented and only for the period of time the room has been rented for. If you used the room for private use (such as office, storage room) you can’t claim any expenses during this time. If it's rented out at a less than normal commercial rate, this may limit the deductions you can claim.


Check out our guide to Renting your property to family members for more information or our Tax ruling IT 2167 Income Tax: rental properties and refer to paragraph 13 - 16 where it talks about letting of property to relatives.

 

If you have further questions, you may find it helpful to contact our early engagement team for advice on how we think tax law applies in your situation. You can request a follow up email or call back by completing our online form.

 

Thanks, JodieH.
 

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Devotee

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I would seek a Private tax ruling from the ATO which are free and can be used to assist you with Centrelink.

 

https://www.ato.gov.au/General/ato-advice-and-guidance/ato-advice-products-(rulings)/private-rulings...

 

$300 per week does look excessive though for just a 'private' arrangement.

 

Best answer

ATO Certified

Community Support

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Hi @kla_24,

 

Welcome to our Community!

 

Generally speaking, if you're renting part of your home to family members the rent needs to be at a normal commercial rate. Any expense you claim can only relate to the part of the house that is being rented and only for the period of time the room has been rented for. If you used the room for private use (such as office, storage room) you can’t claim any expenses during this time. If it's rented out at a less than normal commercial rate, this may limit the deductions you can claim.


Check out our guide to Renting your property to family members for more information or our Tax ruling IT 2167 Income Tax: rental properties and refer to paragraph 13 - 16 where it talks about letting of property to relatives.

 

If you have further questions, you may find it helpful to contact our early engagement team for advice on how we think tax law applies in your situation. You can request a follow up email or call back by completing our online form.

 

Thanks, JodieH.
 

Newbie

Replies 6

I am no expert, and maybe the ATO can verify/reject, but,

I think you should be careful with the terms used. If you rent, then there is an income, but if its for 'board and lodging' then it is not income, provided that you are recieving money to cover costs.

 

Hope thats all you need to do in providing care for your parents, onya

 

I did a bit of digging

ato.gov.auVerified account @ato_gov_au

 

Payments from a family member for board or lodging are considered to be domestic arrangements and are not rental income. You can find more information on our website

 

Also

Centrelink accept the term, BUT, they will apply the 2/3 rule, if the 'lodging' (rent) component cannot be identified. Thus your parents, if recieving rental assistance will have it reduced.

 

May need to find the balance, BUT, always a but, ATO also will see a Captial Gains Tax (CGT) if you own the peoperty and recieve rent.

 

 

Newbie

Replies 5

 Would someone on the disability pension  who shares their house with their brother also on the DSP and brother pays them $230 a fortnight  private rent,  not have to declare it and lodge a tax return becasue the disabilty pension is non taxable and a rental income of $6,000 per year is below the taxable threshold if that is their only income apart from DSP? also the rent is a private doemstic arrangement and a large proportion of the rent is used to cover ultily bills and house mainteance

Devotee

Replies 4

Hi @RobB and @jimbo79,


Thanks for your questions.  @RobB you’re correct that payments from a family member for board or lodging are considered to be domestic arrangements and are not rental income. In these situations, you also can't claim income tax deductions.
You can find read more information on our website here.

 

If you need further information, you can phone on 13 28 61, between 8am and 8pm, Monday to Friday.

 

I hope this helps, JodieM

Newbie

Replies 3

Thanks jodie,so lodging payments between family members is not assessable income, but what exactly is the difference between lodging and renting? In my situation where l live with the owner of the house my sister and pay her rent is that considered lodging.?  L pay for my own food and the rent l pay goes towards utility billls

Devotee

Replies 2

Hi @jimbo79,


We can provide you with general advice on our Community.


Check at our knowledge base article on ‘Renting your property to family members’ that discusses this situation in detail.   Taxation ruling IT 2167 may assist you to answer your questions.


We would recommend contacting our Early engagement area, who can provide you private advice and assistance with legal interpretations.


I hope this helps, JodieM
 

Newbie

Replies 1

those rulings are hard to understand, basically Is lodging when you are sharing the house with the owner and renting when you have legal access to the entire house yourself, is that the difference.

Superuser Registered Tax Practitioner

Replies 0

What an interesting topic.

 

When is payment from a family member rent or for board/lodging?

It depends on the facts.

 

The local paper some years ago reported a story of a elderly lady who rented a room or had a boarder/lodger.

The story goes the renter/lodger informed the government departments and she was in trouble with the ATO and Centrelink/Age Pension as the Rent had not been disclosed on her Tax Return.

 

The only way to act with certainty is to do research along with information from this Community and apply for a Private Ruling.

 

Duncan Smith

 

 

 

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