Question from Lisa updated on 3rd September 2018:
I am an Auckland homeowner with a house in a Trust - of which I am one of the beneficiaries. I live in the house with one other person. He pays a fixed amount to me each week to cover the rent and household expenses and we share some meals.
I understand he can be classified as a boarder, which means there is no income tax to pay, provided the amount I receive is capped at $266/week (for the 2018 tax year); if it’s higher than that I must pay tax on this income and submit a tax return.
My question relates to parking. As part of our negotiation, he pays a higher amount so that he can have guaranteed off-street parking. Would parking be classifiable as an additional cost, as it is not part of the basic outgoings (power, water, internet etc.) for providing board?
The rent and household expenses are only just covered by the current allowable standard-cost method, so it could make a difference of whether the amount is under or over the threshold.
Our expert Matthew Gilligan responded:
This is a great question and one that I have to say I have never considered before. I am also not aware of there being any definitive view on this. I am going to give you my off-the-cuff opinion and will be happy to look into it further if you would like me to do so (or otherwise I encourage you to seek advice).
My off-the-cuff view is that you cannot divide the payment you are receiving from your boarder into different components so that you fall below the threshold by excluding the consideration apportioned to the off-street park. Therefore, if the total amount you receive including any premium for the guaranteed off-street park exceeds the standard cost amount, then you have an obligation to return it as taxable income.Matthew heads GRA's specialist property and asset planning division. He helps clients create optimal tax structures and build wealth through property. He has an extensive buy-to-hold property portfolio, is currently involved in over a dozen developments, and is author of two books - Property 101 and Tax Structures 101.