Tax Topic - Rental Income Earned on Primary Place of Residence

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  ilostnemo on 04/08/2013 - 19:00

  As long as you aren't claiming the expenses, I'd say you are correct.

  I would also seek an accountants view.

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  burningrage on 04/08/2013 - 19:05

  Thank you. :-)

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  siraitken on 04/08/2013 - 19:37

  The rental income would be accessible but you can also claim deductions for that room.
  You would need to pro-rata your home expenses.

  It would be similar to having a dedicated study for business purposes.

  • 

    leiiv on 04/08/2013 - 23:24

    Can we also claim deduction for part of the mortgage interest then?

    • 

      ESEMCE on 05/08/2013 - 09:05

      You NEED to speak to an accountant..
      Don't get advice from unqualified people here.

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      leeroys_dad on 08/08/2013 - 15:38

      you can, but it becomes tricky when you sell because you have to consider capital gains and tax. TBH, it's not worth it.

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  snappy1234 on 04/08/2013 - 20:03

  Is it still the case that you may be taxed pro-rata Capital Gains as well ? (if you sell)

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    burningrage on 04/08/2013 - 20:34

    I would not think so…

    http://www.bmtqs.com.au/cgt-exemptions

    It is because of this, I thought the income would be exempt as well. I used to learn that exemption back in my CPA Taxation class and pretty sure it's still there…

    But I can't seem to find the ITAA Reference online, even not through google…

    Siraitken comment also sounds sensible…. argh… my memory is failing me…

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  jace88 on 04/08/2013 - 20:59

  I think you're confusing main residence exemption (which is in relation to whether CGT is payable upon realisation of a capital gain in relation to your primary residence) and assessable income/etc.

  Without going into too much detail, the rental will be taxable but you can also claim associated deductions.

  Depending on how long you do this for/whether you live there/etc will determine whether you still qualify for the main residence exemption in the event you realise a capital gain upon disposal (i.e. sell).

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  ilostnemo on 04/08/2013 - 23:35

  At the end of the day, look at this way.

  I had to pay my parent board, that is income, so my parents should of paid tax on it.

  At the end of the day know one knows of your arrangement, it's not illegal, just carry on.

  Hmmm I wonder why the govt hasn't thought about taxing board payments.

  Have you drawn up a rental contract, yada yada yada.

  If not pay the extra money of your mortgage and its a win win.

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  burningrage on 05/08/2013 - 08:22

  Ilostnemo, lols.. :-)

  But thanks for the feedback.

  I have one room that we're thinking to lease out to a friend. As the friend already offers to pay the board, I was just thinking whether that income should be taxable or not as she will be living on my home (PPR) :-)

  Cheers

  Zz

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  Smulder on 05/08/2013 - 08:42

  This is an example from the ATO website

  *Example

  Renting out part of a home

  Thomas purchased a home under a contract that was settled on 1 July 1999 and sold it under a contract that was settled on 30 June 2013. The home was his main residence for the entire fourteen years.

  Throughout the period Thomas owned the home, a tenant rented one bedroom, which represented 20% of the home. Both Thomas and the tenant used the living room, bathroom, laundry and kitchen which represented 30% of the home. Only Thomas used the remainder of the home. Therefore, Thomas would be entitled to a 35% deduction for interest if he had incurred it on money borrowed to acquire his home./italic

  While this is an example relating to CGT on main residence, the fact they they state the interest would be deductible implies that the income is taxable.

  Of course the tax system is self-assessing, plenty of people choose to accidently leave income of this nature out.

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  MITM on 05/08/2013 - 11:55

  Why are we even talking about it - is there any paperwork ?

  I'd consider it as a fixed contribution towards weekly expenses like food, electricity, water, paying for the pool guy, internet, payTV, lift to Uni/work/shops etc from a couch surfer.
  I wouldnt consider it as a commercial payment for use of part of a building, as collected by a landlord.

  PS Obviously dont start claiming expenses like mortgage interest.

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  cintamami on 09/08/2013 - 19:04

  -1

  Mate,

  If you want more details, PM me.

  But, no such things as exempt rental income.

  if you are earning rental income from your permanent place of resident - it would normally done on cash on hand basis, nobody needs to know except you and you will not be able to claim any expenses in relation to your place as well, be it maintenance, rates or interest on mortgage. In my view, this will be the best way to do it too, unless you are living in a depreciating house with big mortgage at more than the house's value.

  if you are one of those people who cant sleep at night for pinching a penny here and there, declare the income, claim a portion of your upkeeps as deductions and when you sell your house, a portion of it will be up for Capital Gain Tax.

  Cheers

  • 

    leiiv on 09/08/2013 - 21:33

    What if the tenant pays by bank transfer? Is there any chance at all that the taxman will somehow know and chase you for tax avoidance?