5122 NEW ZEALAND GAZETTE, No. 202 1 DECEMBER 2005

of four occupants (including the boarder). As the weekly rental exceeds the standard-cost, it is necessary to also calculate the
annual capital cost component. The annual capital standard-cost per annum is:

[($200,000.00 \times 5%) - ($10.00 \times 52)] \times 25% \times 52/52 = $2,370.00]

Example C2

A boarding service provider rents a domestic property. The rent is $200.00 per week. The boarding service provider receives
an accommodation supplement of $20.00 per week based on the location of the domestic accommodation and their individual
circumstances. One boarder is accommodated for a full year for $250.00 per week, in a household of four occupants (including
the boarder). The annual capital standard-cost per annum is:

[($200.00 \times 52) - ($20.00 \times 52)] \times 25% \times 52/52 = $2,340.00]

Example C3

A boarding service provider owns a domestic property that was purchased 20 years ago for $120,000.00. They do not receive
an accommodation supplement. Two boarders are accommodated for the same period of six months (26 weeks) during the
year, in a household of four occupants (including the two boarders). Both boarders each pay $250.00 weekly for the services
provided.

The boarding service provider elected to use the standard-cost basis. As the weekly service payments received are greater than
the weekly standard-cost figure of $200.00 for each boarder, it is necessary to calculate the annual capital standard-cost
component to establish if assessable income should be returned.

The boarding service provider’s income tax liability is calculated as follows:

Income ($250.00 x 26 x 2) $13,000.00
Less: Weekly standard-cost
($200.00 x 26 x 2) $10,400.00
$2,600.00

Less: Annual capital standard-cost
[($120,000.00 \times 5%) - $0] \times 50%; \times 26/52] $1,500.00
Income to be returned $1,100.00

Example C4

A boarding service provider owns a domestic property, which cost $275,000.00. They do not receive an accommodation
supplement. Three boarders live in the household at different periods of the year. One permanent boarder pays $200.00 per
week over 12 months and two boarders each pay $250.00 per week for six months (26 weeks) in the second half of the
year. The overall household of three occupants (including the permanent boarder) increases to five occupants in the latter half
of the year.

The boarding service provider’s income tax liability is calculated as follows:

Income ($250.00 x 26 x 2) = $13,000.00
($200.00 x 52 x 1) = $10,400.00 $23,400.00
Less: Weekly standard-cost
($200.00 x 52) permanent boarder $10,400.00
($200.00 x 26) second boarder $5,200.00
($162.00 x 26) for third boarder $4,212.00 $19,812.00

Less: Annual capital standard-cost
[($275,000.00 \times 5%) - 0] \times 33% \times 26/52 = $2,268.75]
[($275,000.00 \times 5%) - 0] \times 60% \times 26/52 = $4,125.00] $6,393.75
Income to be returned Nil

Note: The apparent tax loss based on this calculation is not deductible against
other income of the taxpayer or carried forward to future years.

Example C5

John provides boarding services to Joan and her four-year-old son. John’s partner and their two children each under five years
old also occupy the household. As the three children are under five years, they are not counted as occupants for the purpose of
the standard-cost calculation. John and his partner purchased their home for $150,000.00 10 years ago. No accommodation
supplement is received.

In this situation, one boarder pays $240.00 per week for accommodation over a full year, in an overall household treated as
consisting of three occupants (including the boarder). As the weekly service payment received is greater than the determined
weekly standard-cost figure of $200.00, John will need to calculate the annual capital standard-cost component to establish if
he or his partner is required to return income.