Do you need to declare Boarder Income?

Do You Get Income from Boarders? 

1. 1. Boarder:
      • • A boarder typically pays for accommodation and meals provided by the person or household they are living with.
      • • Boarders are not expected to contribute to rent or utilities separately; it’s often included in the overall fee they pay.
      • • The person or household providing accommodation and meals is responsible for these expenses and is often compensated through the boarder’s payment.

1. 1. Flatmate (or roommate):
      • • A flatmate or roommate typically shares the rent and utility expenses with others in a shared living arrangement.
      • • Flatmates usually split the cost of rent, electricity, water, internet, and other living expenses equally or as agreed upon.
      • • Each flatmate is responsible for their own share of these expenses, which may be separate from their rent.

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, 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.

Example Numbers

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 $231 a week  (2023-2024 rate) 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

If you do not meet the criteria for the Standard Cost method or choose not to use it, you can opt for the actual cost method. This method requires you to keep detailed records of your actual income and expenses for the year. You will need to complete an income tax return to declare any profit or claim any actual expenditure incurred. It is essential to maintain sufficient records to support your tax position.

 Shared Rental Expenses

Shared rental expenses must be apportioned between private and income-earning use. This apportionment determines the portion of expenses that can be deducted from gross rental income. The method of apportionment depends on how the property is used.

By accurately tracking and reporting your actual income and expenses, you can effectively manage your rental property finances and ensure compliance with tax regulations.

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.