Do You Get Income from Boarders?
If you receive boarder income, including from student homestays, you maybe required to declare your income. You can choose either the standard-cost method or the actual-cost method to work out whether you have to pay boarder income tax.
Standard Cost Method
The standard-cost method uses an average price for basics such as the cost of food, heating, power, transport and includes an amount for outgoings such as rates, insurance, mortgage interest cost, repairs and maintenance. It is an average across the country and is inflation-adjusted annually.
If your income from boarders is less than the standard cost allowed, you will not have to file an income tax return, keep records of related expenditure, or pay tax on the income from boarders.
If you have one or two boarders:
The standard cost is $266 a week for each boarder
If you have three or four boarders:
The standard cost is $266 for the first two boarders and $218 for each of the other two boarders.
If you have two boarders and they pay $180 each a week, you do not need to file an income tax return or pay tax on the income from boarders.
If you have two boarders each paying you more than $266 a week you may need to file an income tax return and pay tax on the income from boarders.
To find out if you have any income liability use the Standard cost home-based boarding services calculator.
NOTE: if you have five or more boarders you are not able to use the standard-cost method. You will need to complete an income tax return and include all payments received as income. You can claim actual allowable expenditure but you must keep records to support your claim.
Actual Cost Method
You may choose to keep full records of your actual income and expenses for the year. If you choose this option, you will need to complete an income an income tax return to declare any profit or claim any actual expenditure incurred. You’ll need to keep sufficient records to support your tax position.
Need some assistance?
Contact Carmen today for a free consultation to answer all your questions and help to work out if you need to declare your boarder income.