Income from boarders and lodgers 108-05040010

As the customer will incur costs in providing the accommodation, not all the income they receive from boarders and lodgers is assessable. The amount assessed depends on the type of accommodation provided.

The percentage of the gross amount received that is assessed as income less costs:

• lodging only (no meals) - 70%
• bed and breakfast (no lunch or dinner) - 50%
• board (any meal(s) other than just breakfast) - 20%

A lower amount may be assessed if the customer can show that more than the allowed percentage is expended in costs. For example, via an Income Tax Return (ITR).

If the customer has a mortgage or pays rent for their principal home, the amount of interest on the mortgage or rent paid is deducted from the percentage of income assessed. If the interest or rent amount is more than the percentage of income assessed, no income is assessed from the board and lodging.

If the customer has income from more than one boarder or lodger, add the percentage of income from each person before applying the deduction due to interest on the mortgage or rent paid.

If the customer runs a boarding house, for example more than 5 rooms to let, that they see as a commercial venture, they are considered self-employed. Issue a Business Details form (MOD F), and ask the customer to provide their latest ITR.

For a single customer with a boarder who is not a close relative, verification of their living arrangements may be needed. This is based on information from the Living Arrangements question set.

If the customer advises via an online update that they receive income from boarders or lodgers, the prefilled 'provisional' update in Process Direct automatically applies the above calculation.

If the boarder or lodger is a near relative, the income received is not treated as income for social security purposes. Note: if a partnered child lives with the customer, it is accepted that board or lodging paid to the customer is paid by the child, not their partner.

The area occupied by the near relative is still part of the customer's principal home even if:

• it is a self-contained living area, or
• the home is a dual occupancy

A boarder or lodger is a near relative if they are the person's:

• parent (may include step-parent, foster parent or adoptive parent)
• child (may include step-child, foster child or adoptive child, or
• sibling (may include step-brother, step-sister, foster brother, foster sister, adoptive brother or adoptive sister)

See Determining homeowners and non-homeowners

If the customer is temporarily absent from their principal home, any payments received from a near relative for residing in the home are not treated as income for social security purposes. When the temporary absence provisions cease to apply because the customer has not returned within the allowable absence period, the property becomes a normal rental property, the board and lodging rules do not apply and income from the near relative is assessable under normal rules for rental income.

If the customer has temporarily vacated their principal home and receives rental income from someone other than a near relative, rental income is assessable for this period. See Temporary vacation of principal home. The property becomes a normal rental property once the temporary absence provisions cease to apply because the customer has not returned within the allowable absence period. See Assessing income from real estate or time share and Assessing and coding the Real estate details Mod R.

Provisions relating to income from board and lodging would not normally apply to hosts under the Homestay International Student Accommodation, Australian Asian Centre Exchange, or similar organisations if only one student is involved. Generally, the difference between the amount paid by such organisations for services provided (that is use of the home, food, care for and general socialising activities of the student) and expenses incurred, would be assessed as income.

However, given the range of activities undertaken by Homestay 'hosts' for the student, it would not be unrealistic to expect their total outlays would absorb all the funds provided, for example, hosts would not make a profit. For one student, no income from board and lodging would be assessed for the host. However, if more than one student is staying under Homestay, then economies of scale are made and income from board and lodging could be assessed if the person is undertaking the operation for profit.

Example: if a host has one student for a set period with an income of $150 a week, this income can be disregarded as expenses would likely absorb the income. However, if a host has three students either for a set or overlapping period with an income from each of $150 a week, totalling $450, the host may be required to declare that total income. This income is assessed under the boarder and lodger provisions.

Note: it may appear that someone could run a Homestay, etc. business by having multiple students staying in a large house and getting some economies of scale. Service Officers must determine if the arrangement is 'board and lodging' undertaken for profit and be assessed as commercial profit under the self-employment/business provisions, or if it is more like a domestic arrangement where the activity involves more personal services, for example, driving students to school and taking them on sightseeing trips. This indicates the arrangement has a domestic, rather than commercial character. Such services are not usually offered by boarding houses. Service Officers should contact their Zone Policy consultant if uncertain.

Where a person receives income from the Australian Homestay Network for providing accommodation for a refugee, the assessment of the income depends on the level of board or lodgings provided as per the board and lodging income assessment policy.

A customer may receive income from short term (temporary) boarders and lodgers. Examples include a homeowner or tenant who only rents out a room when there is a test match at the nearby ground, or someone who rents out a room via a home share site such as Airbnb.

This income is treated in the same manner as other board and lodging. The customer can choose to use the board and lodging rules or supply a profit and loss statement outlining the actual expenses, including any commissions or charges paid to a home share website.

For arrangements with long-term tenants, income should only be maintained while the property is occupied. Where a property offering regular short term accommodation, as part of normal operation, is frequently unoccupied, income can be maintained over normal periods of vacancy. For example:

• A customer advertises a room every second month throughout the year beginning in January
• For each month the room is advertised the customer averages $3,000 in net income
• The customer receives no income in the between months as their parents use the property as a holiday home
• As the periods of unoccupancy are part of the normal operation, the income can be maintained throughout the year
• $18,000 of net income per annum is assessed for the customer

Income from people staying at a property that is not the customer's principal home is generally assessed as real estate income. There may be some situations where a person who owns multiple properties used for short-term (temporary) accommodation is treated as earning this income through a business-like manner. This may include where one of the properties involved is a room within the person’s principal home. Factors which indicate that an arrangement could be treated as self-employment include

• The activity is undertaken with an aim to be a main source of income for the person or with the purpose of profit or prospect
• There is a significant number of hours spent on the activity
• The size and scale of the activity is significant
• There is a business like manner in which the activities are planned, organised and carried out
• The income from the activity is recorded on an income tax return as business income
• The activity is liable for GST as a commercial residential property

For income considered to be self-employment income, see Assessment of income and assets from business structures for Centrelink payments

If the property is separate from the customer's principal home (for example, it is a self-contained flat or other dwelling on the same title as the principal home that is rented to person(s) other than a near relative) see Determining homeowners and non-homeowners, Assessing and coding the Real estate details Mod R and Assessing income from real estate and timeshare.

If the second dwelling is a granny flat right or interest, the property is assessed using the granny flat provisions.

This procedure applies for income testing purposes only; it does not apply for calculating Rent Assistance (RA) where different assessment rules apply. The rate of RA payable to the customer may be affected under the 'total household rent' rules, links to which can be found in the References page.

Income from boarders and lodgers is not employment income, it is ordinary income, and used when calculating the accrual of Working Credits. Customers cannot deplete their Working Credit balance to offset this type of income.