Q: I rent out rooms in my owner-occupied house where I live. I have a granny flat with two tenants and another fully self-contained area with two other tenants. All utilities are included in their weekly rents, furnishings, and whiteware are also provided. All tenants are on flatmate agreements.

Would this income be declared as boarder income if food is not provided? And would this income be taxable if it is less than the IRD boarder income threshold? As it exists, each person pays less than the boarder income threshold, so do I need to declare this income and pay tax on it?

A: You have correctly identified that there is a subtle difference between a flatmate and a boarder; a flatmate is someone who shares your living space who is responsible for their own food and transport. A boarder is someone who shares your living space, but the arrangement extends to you providing meals for them, and in some cases transport. The tax rules differ between flatmates and boarders. You have said the tenants in your property are in fact living in a granny flat and a separate self-contained area. If that is the case, they are not flatmates or boarders as they are not sharing the dwelling you occupy.

They should probably be on tenancy rather than a flatmate agreement. In this situation all the rental income they pay is assessable income with deductions allowed based on the apportionment of the rented areas as a percentage of the overall floor plate of the home, i.e. you can claim the costs associated with the portion of the space they occupy, but not your own area. The fact the rent they pay is below the boarder allowance is not a basis not to declare the rental income.

- Mark Withers