The “Full Nest” is the new normal. With rental vacancies at record lows, thousands of Aussie parents are welcoming adult children back home. But as soon as money changes hands, a dangerous question arises: Are you charging board, or are you collecting rent?
The difference isn’t just semantics. It’s the difference between a tax-free family contribution and a taxable income stream. Understanding charging board tax implications is crucial to avoid an unexpected bill from the ATO.
The Vital Distinction: Domestic vs. Commercial
According to the Australian Taxation Office (ATO), the tax rules depend entirely on whether your arrangement is “domestic” or “commercial.”
- Domestic Arrangement (Tax-Free): If you charge a modest amount (e.g., the current benchmark of ~$150/week) to cover costs like food, electricity, and water, the ATO generally views this as a domestic arrangement.
- The Result: You do not need to declare this money as income on your tax return.
- The Trade-off: You cannot claim tax deductions for household expenses (like mortgage interest or depreciation).
- Commercial Rent (Taxable): If you charge a commercial market rate (e.g., $400/week for a room in Sydney) and the arrangement looks like a standard tenancy (exclusive access to the room, strict written lease, no meals included), the ATO may view this as Rental Income.
- The Risk: You must declare this as assessable income. Failure to do so can lead to penalties.
- The Hidden Trap: Using your family home to generate income can potentially impact your Capital Gains Tax (CGT) main residence exemption when you eventually sell the house. Read more about CGT and renting out your home.
The “Benchmark” Safety Zone
To stay safely in the “Domestic Arrangement” zone, experts suggest aiming for “cost recovery” rather than “profit.”
- The 2026 Consensus: ~$150 per week is widely accepted as a fair contribution for an employed adult child.
- What it covers: Utilities, internet, and shared food. It specifically excludes profit for the room itself.
Why You Need a Boarding Agreement (Not a Lease)
Many parents fear that writing things down makes it “commercial.” In reality, a properly structured Boarding Agreement (like those from Chipkie) does the opposite.
A Boarding Agreement serves as your proof that the arrangement is domestic, not commercial. It documents that:
- The payment covers “board and lodging” (meals/bills), not just “rent.”
- The amount is below market rate (non-commercial).
- The rules are family-based (chores, guests), not landlord-based.
Without this, if the ATO (or Centrelink) ever asks why $600 is hitting your account every month, you have no proof of what that money is for.
The “Secret Saver” Strategy
Some parents use the tax-free nature of board to help their kids build wealth.
- Charge Board: Collect $150/week (teaching the child budgeting discipline).
- Save It: Divert that tax-free money into a separate offset or savings account.
- Gift It Back: When the child is ready to buy a home, return the funds as a lump-sum deposit.
- Warning: If you give this money back, make sure you understand the difference between a gift and a loan. Read our guide on the Gift vs. Loan Tax Trap to ensure you don’t accidentally lose that money in a future divorce settlement.
Protect Your Family with Chipkie
Don’t let a casual transfer turn into a tax headache. Chipkie helps you create formal Boarding Agreements that clarify your intent, set ground rules, and keep your arrangement firmly in the “family” zone. Avoid the “rent” trap and set your kids up for success with the right paperwork.
Disclaimer
Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial, legal, or tax advice. Tax laws (including ATO rulings) are subject to change. We always recommend consulting with a qualified accountant or tax professional before making any financial decisions.
