2005 media releases
Inland Revenue releases new tax rules for people who host boarders
15 December 2005
New tax rules for people who host paying boarders will simplify the process. Under a new practice coming into effect from the 2007 income year (generally starting on 1 April 2006), tax liability will be based on the amount of income received, rather than the number of boarders in a household.
Currently people are not required to declare income to Inland Revenue if they have one boarder, but must usually pay tax on 20% of the payments received from two to four boarders. For more than four boarders, they must return income and claim actual expenditure like a small business.
The new rules also remove the need to keep records for related expenditure by providing an option to claim standard costswhen claiming tax-deductible expenses to off-set against their income. If people choose to use these 'off-the-peg' costs for their expenditure, it will make completing and filing tax returns easier, as they will no longer have to keep detailed receipts.
The standard cost that can be claimed for one or two boarders is $200 a week for each boarder, and $162 a week for the third and subsequent boarder(s). The lower rate recognises that costs for each person are less in a larger household.
People with five or more boarders, however, must complete a tax return and claim actual expenditure incurred, with sufficient records to support their tax position.
"Discussion of the proposed changes with interested parties showed that most people with boarders - including student homestays - host only one or two people, and fall within the standard costs," says Graham Tubb, Inland Revenue's National Manager Technical Standards. "These changes will simplify the rules around hosting boarders and mean fewer people will need to file a tax return."
More information is available by calling 0800 227 774.
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Corporate Affairs
Inland Revenue
To make a media query:
Phone 04 890 1698 or email mediaqueries@ird.govt.nz
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P O Box 2198
Wellington 6140
New Zealand
Date published: 15 Dec 2005
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