Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature may not be available in some browsers.
Hi all, how easy is it to rent out a shared accomodation? I bought a house and plan on renting it out at some stage with myself living there also. The area is Sydenham.
IF, are you sure you want to do this? It makes it much more confusing if you're mixing PPOR and IP.
Alex
IndexFund
Do you intend keeping the property as your PPOR?
Do you intend claiming part of the interest payments against the rental income?
If the house is to be your PPOR and you claim interest against the rental income, then you may have to pay CGT (pro-rated) when you sell your PPOR.
If you intend doing this, may I suggest you consult a property-savvy accountant before doing so - you need to be fully aware of all the pros and cons of such an approach.
Cheers
LynnH
Hi Lynn, Yes it will be my PPOR. Yes I do intend to use that rental income to pay for the mortgage or to pay for my bills/food. Whats this CGT?
IndexFund,
If you want to keep your property as PPoR, and also share it with a tenant, the best thing is to get your rent payments in CASH and don't declare them to the tax office.
Many share tenants are happy to pay cash for a room.
http://law.ato.gov.au/atolaw/view.htm?docid=ITR/IT2167/NAT/ATO/00001Payment by family members of an amount for "board and lodging"
17. Arrangements of this nature, whether the payment is said to be for board only or for lodging only or for both, are considered to be in the nature of domestic arrangements not giving rise to the derivation of assessable income by the recipient of the payments. It follows that the question of income tax deductions for losses and outgoings does not arise.
Occupancy of part of a residence on the basis of the occupants' sharing household costs such as food, electricity and cleaning, etc.
18. What will be decisive in cases of this nature will be the characterization of the arrangements, i.e., do they produce assessable income. Situations arise where the owner of a residence permits persons to share the residence on the basis that all the occupants, including the owner, bear an appropriate proportion of the costs actually incurred on food, electricity, etc. Arrangements of this nature are not considered to confer any benefit on the owner. There is no assessable income and the question of allowable deductions does not arise.
19. Care should be taken to ensure, however, that what may be termed ordinary tenancy arrangements are not dressed up in the form represented by the above heading. If the owner were not party to the sharing arrangements or if the occupants made a fixed contribution to the owner for household costs, there would be a presumption that the payments made by the occupants contained an element of reward to the owner for the occupancy of the residence. Enquiries will be necessary in these cases to establish the extent of the benefit to the owner which should be included in his assessable income. Income tax deductions for losses and outgoings attributable to the residence would be determined on the same basis as applies under the heading "arms length letting of an identified part of a residence, e.g. a bedroom, with access to general living areas of the residence".
Thanks all for the replies, I think I have a great idea...
On the other hand the ATO is one obese entity... wants every slice of the pie that we as consumes have. Then they wonder why some avoid tax and dodge the system...
I would definitely consider your roommate as contributing to shared expenses, rather than being your tenant, and leave the ATO out of it. Provided the rent level is a reasonable reflection of shared living expenses and the arrangement is entered into in good faith, I think the ATO would neither want to nor be successful proceeding against you.
Obviously if you're sleeping with one (or more ) of your roommates, you need to be very careful and the whole ballgame changes.