Bringing flatmates in

Question from Mathieu updated on 12th June 2014:

Our expert Mark Withers responded:

The IRD booklet IR264 provides detailed information on the requirement to declare income from boarders or flatmates. It should be noted that there is a difference between a boarder and a flatmate. A boarder is someone who lives with you and generally enjoys the benefit of accommodation, food, power, phone etc for a weekly fee. A flatmate is someone who lives in the same dwelling but generally contributes and pays for their own costs of living including food, power phone etc.

If the arrangement is a true flatmate type situation you are required to declare your rental income. In terms of the costs you can then deduct you can choose to either keep a record of the costs for the portion of the property that is rented out or alternatively keep a record of total expenditure and apportion this on the basis of the area that is rented out.

If you are providing boarding services, again the income must be declared but under this arrangement you can elect to use either the actual cost basis or the standard cost basis to determine your deductions. If you have five or more boarders you can’t use the standard cost method. For four or less boarders the standard cost is determined by the number of boarders you have at any given time and the IRD provide a formulae to calculate the standard costs that you can then deduct.

In the event that the allowable standard cost exceeds the income you are generating no tax will be payable. I suggest you review the calculations in detail from the IR264 booklet IRD publish.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

Search the Ask an Expert archive

Browse all questions in the Ask An Expert Archive »