question about leaseing

Hello I have a question. If i lease a house from the owner under my name and pay $550 per week but the total profits from the 5 bedrooms equals $800 then do i need to declare the money i am receiving as income on my tax return and is this income taxed or not?

Thank you.

 

Does the lease allow you to do that?

 

A 6 month lease that i havent seen but the owner doesnt mind if i make money off it or not.

 

the owner doesnt want to declare the house a rooming house so he has asked me to put the lease in my name and manage it myself...

 

Of course you have to pay tax on income

 

What? Why?

Is the owner related to you?

 

no he knows ive been a good tenant and he said its a good opportunity for me to make some money and let me take the responsiablity, but if i have to declare it as income then its not worth it...

 

Sounds like income to me.

You have a sub lease for which you receive income and a lease expense to the owner for which you would claim a deduction

The issue is more for the owner as their deductions for interest , depreciation, etc will probably be reduced as he is receiving less than market value.

For you simple. Income and expense. Proportioned based on private use for you.

 

So i should collect the rent as cash or its not worth the potential legal risk?

 

ok makes sense. So i should collect the rent as cash or its not worth the potential legal risk?

 

The format its in doesnt change its taxable status

 

I recommend you declare the income and deduct appropriate expenses.

What if your tenant has a dispute with you and informs the ATO you have been receiving undeclared income. Bigger risk.

 

ok you are right thanks. the income would be $800 per week from 5 different tenants so i assume the ATO would notice that...

 

Yes or one of those tenants is claiming some form of rental assistance from centrelink and declares your address as the property and then ATO starts asking your friend questions and he starts panicking and says ohh i lease to my mate michael garland. Talk to him. Then both of you have a please explain as pauline hanson would say.

 

lol makes sense

 

Are you living there? If so you could have say three other tenants instead of five to cover your rent 100% no more.

Then there are no tax issues for you. Is this right?

 

im not sure how it works actually ...

 

He would still have an issue as a proportion of his lease will be for private purposes so non deductible

He will still end up with a profit.