Renting to mates,But living there aswell!

Hey guys, I just bought a house in kalgoorlie I have 3 mates moving in paying 150 a week each in rent. Am I better to get paid in cash, paying bills with the cash money erc Or get it put in the bank an have it like there renting there? Don't know if I have explained myself right! Just been reading a few things on the fourm an slowly learning. Just wanna do it the best way.
 
Personal choice - but make sure you issues receipts (a printed monthly statement will do) and keep it all above board and as a business transaction to avoid any potential fallout in the future.

I'd get it put in the bank as a direct debt from their banks accounts - for ease for both them and yourself.
 
you also need to decide whether your friends are "renting" or "boarding".
My understanding is that if they are renting, you declare the income, can claim the costs but it will affect your capital gains tax.
If they are boarding, you declare neither income nor expenses, and there is no effect on your capital gains tax
but you would want to get some advice on that....
 
Thanks for the replys! If I'm getting rental income it will up my income allowing me to borrow for another investment. Mmmmmm
 
Thanks for the replys! If I'm getting rental income it will up my income allowing me to borrow for another investment. Mmmmmm

From the feel of your earlier posts, additional income is probably not the problem; but as you can see from your own thoughts, and others, there are a few considerations...

IMO, I would keep your current place as your PPOR, and take the cash as board (not rent) from your mates. Sure, there are no deductions, but there are also no CGT considerations down the track, and the income might just cover your repayments! Free living - woo hoo!! ;)
 
A friend did this. Bought a 3 bedroom townhouse and her boyfriend and housemate each paid rent, so 2/3rds of her property was income producing and thus tax deductible. It will also be up for capital gains tax for 2/3rds of the property when she comes to sell it, but she's willing to take a punt on that.
 
Thanks for the replys! If I'm getting rental income it will up my income allowing me to borrow for another investment. Mmmmmm

G'Day bnicklin

Welcome to the Forum

No, rent paid from boarders is not acceptable income for servicing purposes unless it is at 'arms length'

This means that there must be a formal rent agreement in place as a Standard Residential Lease

You can manage the property yourself, but if you want the income to be acceptable to lenders then really, don't hang your hat on it!

The best way to do that is to have your tenants on one lease with 3 x tenants and for you to live somewhere else

Cheer
 
From my understanding, even boarding is income for tax purpose. so you would still be required to declare your boarding and lodging income to tax office. it is best to get professional advice
 
From my understanding, even boarding is income for tax purpose. so you would still be required to declare your boarding and lodging income to tax office. it is best to get professional advice

boarding and lodging is an exempt income for tax purpose ONLY related to immediate family and not for other relationship

Can you post the link to that please? You sound very sure, and this is one of the very "grey" areas that comes up occasionally.
 
http://law.ato.gov.au/atolaw/view.htm?docid=ITR/IT2167/NAT/ATO/00001

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".
 
In bnicklin's case, if he is obtaining only $450pw and this is just covering his mortgage repayments, then at a guess I'd say there is not going to be any 'assessable' income from his venture. By the time he takes depreciation, utility bills etc into account, he'll be running at a loss from an income tax perspective.

Given that the 'income' from his mates will not be taken into account for future loan servicing and that he'd lose part of his PPOR's CGT-free status if he includes the income and also claims the losses, it would hardly seem worthwhile IMO.

The ATO is not really interested in having bnicklin negative gear this arrangement (which is what he'd be doing), in the hope that one day he maight turn a profit from it....especially as it may only be a short term arrangement in any event.
 
I would recommend a written agreement, even a one page one, with an amount of time specified ie 6mths so that after you can ask them to leave.
 
Yeh still reading through it all. Trying get my head around everything. Just about to do the final inspection on the house
Move in next week. Yay.
 
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