Did you know you can make money from your home without selling it?
Some home owners in the Mudgee district, for example, are increasing their income by renting out rooms within their homes.
This has occurred in response to the population growth in the area resulting from the mining expansion, with a corresponding rise in the demand for accommodation.
By renting out a room or rooms you immediately open up two ways of supplementing your income. First, of course, there is the rent you will receive from your tenant or tenants. In addition to this, you could then find yourself entitled to claim certain tax deductions. This can even apply to the payment of rent by family members living at home.
When you declare rent you receive in your tax return, some of the expenses and depreciation related to that rental may be claimed as a deduction.
The Australian Tax Office has a formula for calculating the amount of the expenses that can be claimed as a deduction in this respect. Basically, it is appropriate to take into account the floor area of the home to which the tenant has sole occupancy together with fifty per cent of the general living area that the tenant shares equally with the home owner. Shared living areas could, for example, include the kitchen, bathroom and laundry of the home.
You may also be able to claim a portion of relevant deductions such as insurance, rates, and interest payments made on a mortgage on the property.
In order to know where you stand in relation to making such claims, it is important when renting out a room in an owner occupied home to obtain a property depreciation report from a specialist Quantity Surveyor.
For details in regard to claiming deductions in your own home in these circumstances we recommend you seek professional advice from your accountant.
Property News Issue 40 | thepropertyshop.com.au