Financial planning is really about… sharing with friends

One way to make buying a home easier is to share it with friends or other housemates.

Board received from friends/housemates who live in the house with the owner is not assessable income.

Let’s say you buy a property and have one or two friends living in it with you. They pay $240 a week board. The Australian Taxation Office considers board in these circumstances to be an offset of non-deductible private costs, and not assessable income. This means you do not pay tax on this amount.  In the 37% tax bracket $240 a week tax free is the same as earning $380 a week in taxable income, or the equivalent of nearly $20,000 a year in extra salary.

We have seen another real situation where a client owns a five-bedroom house and receives $200 a week from each of four other housemates. That’s $800 a week cash, the equivalent of nearly $1,400 a week in extra salary, or $70,000 a year.  

At current home loan rates, that would service a loan of $1.4 million. The loan is less than that, meaning that the home is actually cash flow positive. And the owner lives there rent-free.

Sharing with four others is a bit extreme for a 35 year old. But he is paying his home loan off at an incredibly fast rate. And he really likes people.

The Dover Group