by Lisa Dudson on
Article appears under:
Accounting and Tax,
Money Tips
A great way to earn some extra income to help you get ahead is to rent out any spare rooms you have. You may not like someone else living in your home but the income you earn from them may be a nice compromise and help you achieve some of your financial goals.
Options are:
The IRD treats this income the same and you can choose either the standard-cost method or the actual-cost method to work out whether you have to pay tax on this income.
Standard-cost method - Uses an average price for basics such as the cost of food, heating, power and transport. The amount is an average across the country and is inflation-adjusted annually. If your income from boarders is less than the standard cost allowed, you will not have to file a tax return, keep records of related expenditure or pay tax. If you have one or two boarders it’s $254 each then $208 each for three or four. If you have more than five boarders then you will need to keep receipts and file a tax return.
Actual-cost method - You need to keep full records of your actual income and expenses for the year. If you choose this option you will need to complete a tax return to declare any profit or claim any loss.
You can use this calculator to help you work out if you need to pay tax www.ird.govt.nz/calculators/tool-name/tools-h/calculator-homebased-boarders.html
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