1 DECEMBER 2005

NEW ZEALAND GAZETTE, No. 202

5115

Inland Revenue

Tax Administration Act 1994

Determination DET 05/03: Standard–cost Household Service for Boarding Service Providers

This determination, made pursuant to section 91AA (2) of the Tax Administration Act 1994, may be cited as “Determination DET 05/03: Standard-cost Household Service for Boarding Service Providers.”

1. Explanation—(which does not form part of the determination):

   (a) This determination establishes allowable standard-costs for a household service that has been provided as private boarding services, by providers, who are natural persons, in their domestic accommodation. The standard-costs have been determined based on current tax law and are to be used for the calculation of a boarding service provider’s income tax liability, if any. They cannot and should not be used for any other purpose.

   (b) It also describes the components of expenditure recognised as generally incurred in providing boarding services.

   (c) This determination establishes a figure for a cost or costs for the purpose of the Tax Administration Act 1994 and the Income Tax Act 2004 that may be treated as being incurred by a boarding service provider in deriving:

   (i) exempt income; and

   (ii) assessable income.

   (d) This determination also prescribes a method of calculating such a figure, as set out in paragraph (c).

2. Reference—This determination is made pursuant to section 91AA of the Tax Administration Act 1994.

3. Scope of Determination—Except where its application is specifically excluded in another determination or a fresh determination, this determination may be used by all natural persons who provide private boarding services in their domestic accommodation. This determination shall not apply to situations which are the subject of any other determination made under section 91AA, such as where persons are accommodated in domestic accommodation as an extension of any specialised health care or institutional half-way house to facilitate rehabilitation. It also does not apply where the boarding service is provided as part of a G.S.T. taxable activity of a registered person or to cases where the boarding service provider has on average five or more boarders in residence during the income year. Subject to any adjustment based on the annual movement of the Consumers Price Index as at the end of March each year, this determination, unless specifically withdrawn, shall apply from the 2007 income year.

4. Interpretation—In this determination, unless the context otherwise requires:

   ● Expressions used have the same meanings as those in sections CW 49 and OB 1 of the Income Tax Act 2004 and section 91AA of the Tax Administration Act 1994.

   ● “boarding service provider” means a natural person (which term shall include one or more natural persons living together in the same residence) who carries on an activity of providing a private boarding service in their domestic accommodation.

   ● “private boarding service” means all activities in respect of accommodation and associated care including meals, laundry and utilities typically provided by a boarding service provider to other persons (boarders) in the boarding service provider’s domestic accommodation, in return for payment.

   ● “Consumers Price Index” means the application of the annual movement of the All Groups Consumers Price Index to the weekly standard-cost per boarder.

   ● “domestic accommodation” means the dwelling which is the principal residence of any boarding service provider.

   ● “standard-cost” in relation to any private boarding service, means the standard-cost that has been determined by the Commissioner of Inland Revenue for the purpose of this determination, as referred to in section 91AA of the Tax Administration Act 1994.

5. Standard-cost for Boarding Service Providers: General Notes—A boarding service provider who derives income from such services in an income year, may:

   ● elect to use the standard-cost as set out in this determination; and

   ● to that extent payments received from private boarding services will be exempt income.

   Boarding service providers may elect to use the standard-cost method by not including the amount of income derived from providing boarding services, up to but not exceeding the determined standard-costs in aggregate in any tax return otherwise required to be furnished.

   A boarding service provider who makes such an election will not be eligible to claim any net tax loss. Losses may only be claimed where the taxpayer furnishes a full return of income (showing all payments received) and claims actual expenditure, with sufficient records available to support their tax position.

   That is, where a boarding service provider elects to use the determined standard-costs, they may not deduct any additional cost of providing the boarding services, if the additional cost relates to an item of standard-cost expenditure represented in this determination.

6. Determination—A private boarding service shall be a standard-cost household service for the purposes of section 91AA where:

   ● the private boarding service involves the use of the boarding service provider’s domestic accommodation; and

   ● the private boarding service involves activities and benefits that usually or commonly occur in or are derived from a domestic (“family”) household.