We\u2019ve seen quite a bit of confusion recently around whether renting out a room in your primary residence counts as declarable income to the Australian Tax Office (ATO). Guidelines that are available on this topic tend to be rather difficult for the layperson to decipher, leading to many incorrect claims \u2013 whether people declaring income when they don\u2019t have to, or not declaring income when they should.<\/p>\n
It\u2019s essential that you get this aspect of your tax return correct \u2013 not just because it\u2019s important to declare your income accurately, but also because unnecessary declaration of rental income in your primary place of residence can open you up to complications around capital gains tax if and when you sell your home.<\/p>\n
The primary question that you should be asking yourself is: are you taking in boarders\/renters to make an income, or is any money that you receive simply meant to recoup your expenses (extra utility costs, food, etc)? Generally speaking, if you\u2019re taking rent money merely to offset your<\/p>\n
expenses, then it won\u2019t count as declarable income.<\/p>\n
This is one case in which the ATO has made a fairly clear and unambiguous ruling, and stated that income derived from providing accommodation organised with the Department of Education is definitively not considered assessable income. This means that it doesn\u2019t have to be entered on your tax return at all.<\/p>\n
If you are renting out rooms for the income, the next question to ask is: are you doing so as part of a business? Typically, unless you\u2019re running a B&B or something of the sort, the answer to this will be no \u2013 and you should declare the income not as business income (causing you to be assessed as a sole trader), but as rental income. We\u2019ve seen a few cases recently where people have declared their room rental in situations where it should definitely have been declared \u2013 but have classified it incorrectly.<\/p>\n
If in doubt\u2026
\nYour best bet is always to talk to an accountant for help in figuring out whether your rental income needs to be declared on your tax return. They can help you to figure out whether the ATO would consider it assessable income, and if so, which type of income.<\/p>\n
Renting out part or all of your home<\/a><\/p>\n Taxation Ruling IT 2167 \u2013 Income Tax: rental properties \u2013 non-economic rental, holiday home, share of residence, etc. cases, family trust cases<\/a><\/p>\n ATO Interpretative Decision: Income Tax: Payments received under a homestay arrangement<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" We\u2019ve seen quite a bit of confusion recently around whether renting out a room in your primary residence counts as declarable income to the Australian Tax Office (ATO). Guidelines that are available on this topic tend to be rather difficult for the layperson to decipher, leading to many incorrect claims \u2013 whether people declaring incomeRead More \u00bb<\/a><\/p>\n","protected":false},"author":1,"featured_media":60,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":"","spay_email":"","footnotes":""},"categories":[14,10,19],"tags":[],"class_list":["post-59","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ato-compliance","category-news","category-property-investment"],"jetpack_featured_media_url":"https:\/\/www.trakaccountants.com.au\/blog\/wp-content\/uploads\/2017\/03\/renting-FB.jpg","_links":{"self":[{"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/posts\/59","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/comments?post=59"}],"version-history":[{"count":1,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/posts\/59\/revisions"}],"predecessor-version":[{"id":61,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/posts\/59\/revisions\/61"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/media\/60"}],"wp:attachment":[{"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/media?parent=59"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/categories?post=59"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.trakaccountants.com.au\/blog\/wp-json\/wp\/v2\/tags?post=59"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}