Taxation of boarding service providers' income - questions and answers

Why is the calculation for the property based on capital cost rather than market value?
The general tax rules only allow actual expenditure.

What about improvements?
Service providers can include improvements to a property with the purchase price when working out the capital cost value. It is important that documentation is available to substantiate a claimed capital cost value, if requested.

Will the standard-costs be inflation adjusted - how often?
Yes. Weekly standard-cost rates will be subject to a retrospective Consumers Price Index adjustment (as at March). We will publish these rates by June of each year (in the Gazette and our Tax Information Bulletin) and apply to the previous year retrospectively.

How many service providers do you estimate will be affected by the change?
Not many. We think the majority of service providers will charge less than the determined standard-cost and won't be required to return income or pay tax on payments received from boarding services.

Does "income" include incidentals such as payment for doing a boarder's laundry?
Yes.

How does the system work for people renting their accommodation?
When service providers charge more than the weekly standard-cost they will be able to claim a portion of the rent paid as expenditure incurred in providing board under the annualised capital standard-cost calculation.

What is a homestay coordinator's role in giving information and policing the rules?
Homestay coordinators are not responsible for the personal tax affairs of boarding service providers.

Doesn't the standard rate set a de facto market rate?
No. We have determined the standard-costs based on special tax rules as provided for under current tax law, to be used for the calculation of a boarding service provider's income tax liability, if any. The standard-costs cannot and should not be used for any other purpose.

Date published: 24 Nov 2005

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