Renting to flatmates
November 12, 2019
Income earned from rent is taxable and you can claim deductions for costs related to earning that income. Different tax rules apply depending on the circumstances.
For tax purposes, renting to flatmates is different from short-stay accommodation or that provided to tenants, boarders, care home residents, or student or emergency accommodation. This fact sheet looks at renting to flatmates.
Figures to focus on
2,500 |
If your tax due at end of year is more than $2,500, you’ll have to pay provisional tax instalments the next year. |
60,000 |
If you earn more than $60,000 a year from your taxable activities, you must register for GST. If you earn less than $60,000 a year, you can choose to register for GST. |
Flatmates and tenants
In most flatting situations payments made by one flatmate to another as a share of the overall accommodation costs aren’t classed as taxable income. But if one flatmate (usually the house owner) sets out to profit from renting to flatmates, the profit is taxable income.
If you’re in this situation you need to declare this as income. You can claim some of your expenses.
If you live in a property and have tenants living in another part of your multi-flat building, you must declare your rental income. Use one of the following methods to work out which expenses you can claim against your rental income:
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keep records of expenses that relate to the property you’re renting out, and claim these as costs against your income
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keep records of total expenses for the property and apportion these according to the area of the rented-out part. For example, if you rent out a flat that takes up a quarter of the area of your house, you can claim 25% of the house expenses.
Do I need to file a tax return?
If your income from renting to flatmates turns a profit after you have taken your allowable expenses into account, you need to file a return. You can use the ordinary tax rules (rental income, less allowable expenses) to work out what to put in your end-of-year return.
What if I co-own the property?
If you own (or rent) the property jointly, the income needs to be split appropriately between the owners when declaring the income in the tax return.
Our recommendation
If you would like to talk through exactly how the rules apply in your case, please contact us. As you may not know till the end of the tax year whether you’ll need to file a tax return, make sure you have full records of all income and expenses relating to the property.