You may need to pay tax on rental income you receive from private boarders or home-stay students.
If your income from boarders or home-stay students is higher than your total costs you need to pay tax on the difference.
Who can use the standard cost method for boarders and home-stay students
You're able to use the standard cost method for your deductions if:
- you're an individual (ie not a company)
- you had 4 or fewer boarders or home-stay students in your home at all times throughout the income year
- the private boarding service is not part of a GST taxable activity
- your home is not used for both boarders and short-stay accommodation guests (like Airbnb)
- no-one in your home uses any other standard costs for the property (for example the standard costs for in-home childcare)
- no-one claims any deductions for the use of the home to earn income, for any time in the year when you have boarders.
- your home is not held in a trust, or if it is you either:
- have paid all the property costs for the year. These costs are home loan interest, rates, repairs and maintenance, or
- do not include the annual housing standard costs (see more about these below).
What to do if you cannot use the standard cost method for boarders
If you're not able to use the standard cost method for boarders you must use the actual cost method.
Actual cost method for working out rental income and expenses
How the standard cost method works
Rather than working out your actual costs you can use the standard cost method. The standard costs we set cover expenses hosts typically have for boarders or home-stay students.
There are 3 groups of standard costs:
- weekly standard costs
- annual housing standard costs
- annual transport standard costs.
Weekly standard costs
This covers things like:
- phone and internet
- use of furniture
- entertainment and leisure.
We set the weekly standard costs rate every year. It's adjusted for inflation using the Consumer Price Index (CPI) figures. We cannot set the rate until those CPI figures are given out each year.
We usually set the rate in May for the tax year that ended on 31 March.
The rate for the 2021-2022 income year is $207.
This rate applies for each boarder or home-stay student you have, up to a maximum of 4.
If you have 5 or more boarders or home-stay students you cannot use the standard cost method. You need to use the actual cost method.
Annual housing standard costs
This covers things like:
- mortgage interest or rent
- home repairs and maintenance.
There is a formula for housing standard costs. It takes into account the cost of your home and the number of people living there.
Property held in trust and using the annual housing standard costs
You can include the annual housing standard costs if your property is held in trust. But only if you've paid all of the property's costs for the year. These costs are:
- home loan interest
- repairs and maintenance to the property.
Annual transport standard costs
This covers things like:
- vehicle insurance
- vehicle registration and warrant of fitness
- vehicle repairs and maintenance.
There is a formula for transport standard costs. If you want to deduct transport costs from your income from boarders or home-stay students you need to keep a log book of kilometres travelled. You can only count the kilometres you travelled:
- when the main purpose of the trip was to take your boarder or home-stay student to an activity or event
- if the boarding agreement says you will provide transport as part of your hosting services.
Changes to standard cost method from 2019-2020
The weekly standard cost rate is lower than what it was in earlier years. This is because it no longer includes a transport allowance. Typically hosts no longer have transport costs as part of boarding agreements. It's why we removed this allowance from the 2019-2020 weekly standard costs rate.
You may be able to deduct the transport standard costs from the income you get from boarders or home-stay students. It depends on your situation.
Also, in previous years we had different weekly standard costs rates for your third or fourth boarder or home-stay student. From 2019-2020 the same rate applies to all boarders or home-stay students, up to a maximum of 4.
See if you need to pay tax
If your income from boarders or home-stay students is lower than the weekly standard costs rate you do not need to:
- file an income tax return for this income
- keep records of related expenses
- pay tax on this income.
If your income from boarders or home-stay students is higher than the weekly standard costs rate you can also deduct the following costs from that income:
- housing standard costs, if you're eligible
- transport standard costs, if you're eligible
- both of these.
If you still have remaining income from boarders or home-stay students after deducting all the standard costs that you are eligible to deduct, you need to pay tax on that remaining income.
Most hosts will not have to deduct the transport standard costs as the total of the weekly standard costs plus the housing standard costs will be higher than their income.
You cannot claim any losses from providing a boarding or home-stay student service. This means that if your total standard costs are higher than your income from boarders or home-stay students you cannot deduct the excess from any other income you receive such as salary or wages.
The easiest way to work out if you need to pay tax is to use the worksheet below.