Homeowners deterred from renting spare rooms due to tax and regulatory complexity

Homeowner Ali Bradley considers herself one of the lucky ones and would like to pay it forward by renting out some of her spare rooms at an affordable rate.

But the tax implications have so far dissuaded the Brisbane mum, who is now entering the empty nester stage, from doing so.

"Cost and complexity, capital gains tax implications, income tax and also the complexity of regulations," she said.

"From my point of view, we're in a housing crisis. We need a wider range of solutions and we don't need deterrents."

Ms Bradley said the goal would not be to make money, but to provide housing, and in return, she could continue to afford the hefty maintenance bill for her older home.

Boarding was once more common

Property economist Lyndall Bryant has been researching what she characterises as boarding arrangements for several years.

She said these had once much more common, with many younger people who moved to larger cities as students or apprentices renting a room in a larger house.

"That really sparked my interest into, why don't we do that anymore," the lecturer at Queensland University of Technology said.

Dr Bryant said her research had shown there were a few barriers, and chief among them was the fear of taking in a renter or boarder meaning a person was liable to pay both income tax and capital gains tax, as well as the impact it could have on a pension.

People were also concerned about safety and security if they took a stranger into their home, she said.

Dr Bryant said there were overseas examples, including in Ireland, of schemes which incentivised boarders. For example, the government could set a threshold for affordable rent for a room at which a person wasn't taxed.

"Countries are realising that new housing supply is a long way off and we do have a rental crisis and we need to be providing more affordable housing options to people," she said.

In most cases, board arrangements mean the person is sharing the cost of the house including utilities, internet, power and insurance, rather than paying a certain amount in rent.

There are some exemptions set out by the Australian Taxation Office (ATO) where these kinds of arrangements don't attract tax.

A spokesperson for the ATO said this included where children or close family members "boarded".

"These … are usually different from circumstances where a stranger is offered a tenancy at the property, or what is more commonly referred to as 'rent' which tend to lack the element of being a private or domestic transaction and are more commonly conducted at arm's length," they said.

Census data suggests there could be as many as 13 million spare bedrooms across the country.

Federal Home Affairs Minister Tony Burke reignited discussion about these rooms earlier this month in a speech about migration where he remarked on living styles having changed across the years to mean fewer people per household.

He said everyone had the right to choose how they lived.

Some data, including a 2019 survey of older Australians conducted by the Australian Housing and Urban Research Institute showed only small numbers of people wanted to rent out a room in their home.

Advocates agree renting spare rooms isn't for everyone but say those who want to do so should have clear guidelines.

Calls for clearer rules about boarding

The Homeshare Australia and New Zealand Alliance (HANZA) has long been calling for clearer rules and defined protections for boarders and homeowners.

In Queensland, where Ms Bradley lives, boarders and lodgers are not covered by standard residential tenancy laws in most cases where the owner lives at the premises and rents out three or fewer rooms.

A spokesperson for Queensland's Department of Housing and Public Works said the government was committed to ensuring everyone had access to safe, secure and affordable housing.

No changes to rental laws as they relate to boarding arrangements are currently being considered, they said.

HANZA chairperson Rosie Lawn wanted to see greater action by state governments in the space, saying home share arrangements were one strategy that could help with the country's housing crisis.

Ms Lawn said it wasn't just about renting, but about creating a relationship between the two people, like arrangements about chores or other household tasks.

"I think the government being able to provide clear information to them about how they're protected, that would really help more people step into home sharing," Ms Lawn explained.

The federal treasurer was contacted for further comment on clarifying tax settings for people renting out spare rooms but did not respond to specific questions.