House Sitting Fee and ATO

Hi all,

I will be moving interstate soon but until I am settled with work and accommodation a family member will be looking after my house and dogs in exchange for a discounted rent enough to cover mortgage costs of $250pw. This will be for approximately 6-12 months. I spoke with my accountant and she said the ATO didn't have to be informed as this would be a house sitting fee, but if it was much higher then I would have to treat it as a rental property. I haven't heard of this before and am wondering if anyone on this site has come across this?

 

Sounds like rent to me.
You deductions would be limited as undermarket value.

 

I wasn't planning on making any deductions for this period, but will review my situation in 6-12 months.

 

Can they be classed as boarders?

 

Only if they are paying for their share of food and electricity - not the loan.

 

@Terry_w - mere coincidence? I assume that the OP would be storing their furniture at the house so pet sitting and chair warming could be in the position description.

 

They will be paying for their expenses. I'm storing everything there. I'm just confused as to how my accountant came up with this information. I did question her about it and she seemed very certain about it.

 

I found this on the ATO website:

Note that payments from a family member for board or lodging are considered to be domestic arrangements and are not rental income. In these situations, you also can't claim income tax deductions.

 

Is the amount being paid just board? If so it may be ok. Look for the definition which can be found in a very old tax IT

 

What are you hoping to achieve? As in why did you speak to your accountant?
Do you want to claim IP costs?
Or are you just asking so you are doing the right thing in terms of declaring the income?

 

Boarding and lodging have legal meanings which probably don't cover this sort of situation. Just because its a family member doesn't change what the legal characterisation might be.

 

This is the key. What are you actually trying to get out of this whole situation.

Do you want to claim deductions? If so charge market rent, claim full dectuctions.

Don't want to claim deductions? Don't state the charge is to cover 'loan repayments' would be more to cover electricity, food for dog, upkeep for the property etc - board.


*Not an accountant / Not advise

 

I was closing a business down and was asking my accountant for advice on that and wanted to know how much tax to put aside if I rented my house out to my son. When she heard that it was to just enough to cover the costs of the mortgage payments and to look after the dogs she said I wouldn't have to declare it. I just want confirmation that what she said was correct.

 

Thanks for that.

 

Well in that case I think it's safe to say the ATO doesnt need to know anything.

 

Not tax advice but I found this on the ATO website. It appears to apply to your situation.

Payment by family members of an amount for "board and lodging"
17. Arrangements of this nature, whether the payment is said to be for board only or for lodging only or for both, are considered to be in the nature of domestic arrangements not giving rise to the derivation of assessable income by the recipient of the payments. It follows that the question of income tax deductions for losses and outgoings does not arise.​

IT 2167 - Income Tax: rental properties - non-economic rental, holiday home, share of residence, etc. cases, family trust cases (As at 4 July 1985)

 

Thats the IT i was thinking of above