You can rent out a room in the house you live in, and in New Zealand the person who moves in will usually be a flatmate or a boarder — not a tenant. That single distinction decides almost everything else: which tax method you use, whether the Residential Tenancies Act applies, what happens to any benefit or Accommodation Supplement you receive, and even which tribunal hears a dispute. This guide walks through the whole process — choosing the right arrangement, pricing the room, the written agreement, the tax, and the Work and Income rules — with every factual claim drawn from official New Zealand government sources, so you can check each one yourself.

 

Can you rent out a room in your own house in NZ? (Quick answer)

Yes. If you own the home and keep living in it, the person renting your spare room is generally a flatmate or boarder, and the Residential Tenancies Act does not automatically apply, according to the New Zealand Government's guidance. Put the arrangement in a written flat/house-sharing agreement, and check the tax position: board charged at or below Inland Revenue's weekly standard cost — $245 per boarder for the 2025–26 income year — is exempt income, while money from flatmates is worked out under IRD's actual cost method and any profit is taxable.

 

First, work out what you're creating: flatmate, boarder or tenant

Skip this and everything downstream goes wrong — the wrong tax method, the wrong dispute forum, the wrong assumptions about notice. New Zealand law and the tax system treat three arrangements very differently.

 

A flatmate pays for a room and shares the house, expenses and chores with you. According to Inland Revenue, flatmates share a house, expenses and chores, and if you own the home the money they pay you may leave you with taxable profit.

 

A boarder pays for accommodation plus services. Work and Income defines a boarder as someone who pays for accommodation and food in another person's home, where the food cost can't easily be separated from the total; the payment can also cover things like power or internet. IRD draws the same line: part of a boarder's payment is for services such as meals or laundry, which is why boarders get their own concessionary tax method.

 

A tenant rents the premises under the Residential Tenancies Act 1986. Tenancy Services confirms the Act does not cover flatmates, along with several other living arrangements — but you and the person moving in can choose to "contract in" to the Act if you both want its protections (more on that below).

One warning before you scale up: if your property has, or is intended to have, six or more tenants renting rooms at any one time for 28 days or more, Tenancy Services says you are operating a boarding house — a specific tenancy type under the Act with its own obligations. The definition sits in section 66B of the Residential Tenancies Act. One or two people in your spare rooms is nowhere near this line; a sprawling home business of individually rented rooms can cross it.

 

How to rent out a room in your house: 9 steps

1. Check your own obligations before you advertise

Three checks take an hour now and prevent expensive surprises later.

 

Your mortgage. This one is between you and your bank — it's governed by your own loan terms, so read them, or simply ask your lender whether they want to know about a paying occupant before someone moves in. A five-minute call now beats an awkward conversation later.

 

Your insurance. What your home and contents policy does with a paying occupant depends entirely on its wording, so no government page can answer this for you. Ask your insurer directly — ideally in writing — whether your cover continues unchanged with a flatmate or boarder in the house, and keep the reply with your agreement.

 

Your title and any benefit you receive. If your home is a unit title (most apartments and many townhouses), read your body corporate's operational rules first — the government's official Unit Titles website explains how these rules work. And if you receive any payment from Work and Income, declaring board or rent you receive is a condition of getting those payments — step 8 covers exactly how it's assessed.

 

2. Choose room-only or full board

This choice sets both the vibe and the tax method, so make it deliberately rather than defaulting.

 

Room-only (flatmate). They buy their own food, split the power bill, live independently. Your income is assessed under IRD's actual cost method — more paperwork, and any profit is taxable.

 

Full board (boarder). One weekly payment covers the room, meals and usually power and internet. You do more of the domestic work, but you can usually use IRD's standard cost method, which frequently means no tax and no tax return at all (step 7 has the numbers). Homestay hosting for international students works the same way — IRD treats home-stay students and private boarders under the same rules.

 

A note on short stays. Renting the room to Airbnb-style guests for a few nights at a time is a different animal. IRD applies a separate short-stay standard-cost regime — a fixed nightly rate, usable only if you rent out 100 nights or fewer per year — and short-stay hosting counts as a taxable activity for GST if your total turnover passes $60,000. Mixing boarders and short-stay guests in the same home also disqualifies you from the boarder standard cost method, so pick one lane. This article covers the long-term lane.

 

3. Set the price with real data, not guesswork

Don't price off one Facebook listing. Tenancy Services publishes market rent data for every district, built from actual bonds lodged over the previous six months — Tenancy Services notes it's a guide rather than a sole determinant, but it's the closest thing New Zealand has to ground truth on what rooms and houses actually rent for, because it reflects agreed prices, not asking prices.

 

For a room-only flatmate, work back from the whole-house market rent for your suburb and property type, adjusted for what the room and shared spaces offer. For board, price the bundle: room, food, power, internet. If you charge at or below IRD's weekly standard cost ($245 for 2025–26), the tax question usually disappears entirely — some hosts deliberately price at the standard cost for exactly that reason, though your actual costs should drive the number.

 

4. Find and screen the right person

You're choosing someone to share your kitchen, not just fill a room, and the law recognises that. The Human Rights Act 1993 prohibits discrimination in letting accommodation, but section 54 creates an exception for residential accommodation that will be shared with the person providing it — so when you'll be living together, you can lawfully be choosy in ways a standard landlord cannot (preferring a female flatmate in a household of women, for example). Choosy doesn't mean careless: meet them in person, in the house, and check their story holds together.

 

Practical screening that works for shared homes: a short first meeting over coffee, a walk through the actual room and shared spaces, direct questions about work pattern, guests, cleaning habits and why they're moving, plus at least one previous flatmate or landlord reference you actually phone.

 

5. Put everything in a written flat/house-sharing agreement

A handshake feels friendly right up until the first disagreement about the power bill. The New Zealand Government recommends a written flat-sharing agreement covering, at minimum: the weekly amount and how it's paid, what's included (power, internet, use of the kitchen), any bond, how much notice they'll give before moving out, rules for visitors and overnight stays, and anything else that matters to you — pets, smoking, quiet hours.

 

You don't need to draft it from scratch. Tenancy Services publishes a free flat/house sharing agreement template — use it, fill in every field, both sign it, both keep a copy.

 

Want full legal protections anyway? You can contract in. Tenancy Services explains that people not covered by the Residential Tenancies Act can choose to opt in: everyone involved agrees in writing which parts of the Act (or all of it) will apply, and everyone signs and dates the agreement. Most owner-occupiers keep the flexibility of staying outside the Act, but contracting in is the legitimate route if you or the person moving in wants the Act's formal protections.

 

6. Sort the bond and the money flow

Because a flatmate or boarder arrangement sits outside the Residential Tenancies Act (unless you contract in), any bond is a private matter between you — the Act's bond lodgement scheme applies to tenancies covered by the Act. That makes your agreement do the heavy lifting: record the bond amount, what it can be used for, and exactly when and how it will be refunded. Then handle the routine money like a professional — one fixed payment day, bank transfer with a reference (never cash without a receipt), and a dated note of anything that changes. If a money dispute does arise later, records are what win it.

 

7. Get the tax right (this is where the flatmate/boarder split bites)

New Zealand's tax settings genuinely favour boarders over flatmates for owner-occupiers, and almost nobody spells this out. Here's the machinery.

 

If you take a boarder or home-stay student: the standard cost method. Rather than tracking real expenses, IRD lets you deduct a set weekly amount per boarder. According to Inland Revenue, the weekly standard cost for the 2025–26 income year is $245 per boarder, covering food, power, phone and internet, use of furniture, and entertainment. If what you charge is at or below that figure, the income is exempt: no tax to pay, no return to file, no expense records to keep for it.

 

Charge more than $245 and you're not automatically taxed on everything — you can also deduct IRD's annual housing standard costs (a formula reflecting your home's cost and the number of occupants, covering mortgage interest or rent, insurance, rates and maintenance) and, where your boarding agreement includes transport and you keep a logbook, annual transport standard costs. Tax applies only to income left after all the standard costs you're eligible for. IRD provides a boarder income calculator that does the arithmetic.

 

The eligibility rules matter, so check them before assuming you qualify. Per IRD, the standard cost method is available only if you're an individual (not a company), you had four or fewer boarders at all times during the year, the boarding service isn't part of a GST taxable activity, your home isn't also used for short-stay guests like Airbnb, nobody in the home uses other standard costs (such as in-home childcare) or claims deductions for using the home to earn income while you have boarders, and — where the home is in a trust — you meet specific conditions about who pays the property costs. Five or more boarders means the actual cost method, no exceptions. Two quirks worth knowing: IRD sets the rate each May for the tax year that just ended on 31 March (it's CPI-adjusted, which is why it can't be set earlier), so you plan against the latest published rate; and you can never claim a loss from boarding — if your standard costs exceed your board income, the excess can't be offset against your salary or anything else.

 

If you take a flatmate: the actual cost method. IRD is direct about this: if you own the home and get flatmates in, you may have tax to pay on the profit. You work it out under the actual cost method — gross rent received, minus allowable expenses. Expenses that serve both you and the flatmate (rates, insurance, interest, power if included) must be apportioned between private and income-earning use, and you can only claim for the time the room is actually rented. Any profit goes in your IR3 return and is taxed at your marginal rate. If your apportioned deductions exceed the rent, the excess is ring-fenced: it can't reduce your salary or wages, and generally carries forward against future residential income.

 

One arrangement that owes no tax at all: if you're a tenant whose flatmates pay you their share to pass on to the landlord, IRD says that money isn't taxable income — you're just the conduit.

IRD's plain-English guide to all three roles — Boarders, flatmates and tenants: tax responsibilities (IR1037) — is worth downloading before you decide. And because tax outcomes turn on your exact facts, a conversation with an accountant or with IRD directly is cheap insurance if your situation has any wrinkle: a trust, a home business, more than a couple of boarders.

 

8. Tell Work and Income if you get a benefit or housing help

If you receive any payment from MSD — a main benefit, Accommodation Supplement, Temporary Additional Support, or you live in public housing — declaring board or rent you receive is not optional. Work and Income states plainly that telling them about board and rent payments is part of your obligations, and the easiest route is the 'Declare boarders and renters' option in MyMSD.

 

How it's assessed changed recently, so ignore older explanations. Under the rules on Work and Income's current guidance:

 

Board payments are split 62/38. MSD treats 62% of each board payment as the accommodation portion (the other 38% covers food and services). That 62% reduces the accommodation costs used to calculate your Accommodation Supplement or Temporary Additional Support — so your housing subsidy can drop even when no "income" is counted.

 

Only the excess counts as income. MSD compares the 62% (for board; 100% for rent) against your accommodation costs. If it's higher, the difference is treated as income for your benefit; if it's lower, none of it counts as income.

 

Public housing has its own rule, effective 2 March 2026. If you live in public housing, anyone living with you who isn't on the tenancy agreement is treated as a boarder, and 62% of their board payments is now added to your Income Related Rent from your next annual review or change of circumstances.

 

MSD cross-checks. Where both the boarder and the person they pay are getting housing help, MSD independently verifies the details with each of them — and if the numbers don't match and aren't corrected within 10 working days, a housing subsidy stops on day 11.

The honest summary: taking in a boarder while on a benefit can still leave you ahead, but the arithmetic is specific to your situation. Declare first, then let MSD confirm the effect — guessing risks a debt you'll be repaying for years.

 

9. Plan for living together — and for the day it ends

The agreement you wrote in step 5 is also your exit plan. Because the Residential Tenancies Act doesn't apply, there is no statutory notice period for a flatmate or boarder in your own home — the notice is whatever your agreement says, which is exactly why the government's template asks you to specify one. Two weeks is common; write down whatever you both consider fair, and hold yourself to the same standard you expect from them.

 

If a dispute can't be talked out — an unpaid bond, damage, a bill fight — the New Zealand Government directs flatmate disputes to the Disputes Tribunal, not the Tenancy Tribunal, which only handles landlord–tenant matters. Community Law centres and Citizens Advice Bureau offer free guidance before you get that far.

 

When the Residential Tenancies Act does apply

Three situations pull you inside the Act, and each changes your obligations substantially:

 

1. You move out. Rent the whole house — or rent rooms individually in a home you no longer live in — and you're a landlord with tenants. Tenancy Services covers room-by-room tenancies specifically. Among much else, all rental properties covered by the Act have had to comply with the healthy homes standards since 1 July 2025 — heating, insulation, ventilation, moisture and drainage, and draught stopping.

 

2. You contract in. As covered in step 5, everyone can agree in writing to apply the Act (or chosen parts of it) to a flatmate arrangement.

 

3. You hit six. Six or more tenants renting rooms for 28 days or more makes the property a boarding house under section 66B of the Act, with the Act's boarding house rules attached. Remember the tax cap runs out first: at five boarders you already lose the standard cost method.

 

FAQ

Do I have to pay tax on money from a boarder in NZ? Often, no. If you charge each boarder at or below IRD's weekly standard cost — $245 for the 2025–26 income year — and meet the method's conditions, the income is exempt and you don't file a return for it. Above that, you deduct IRD's standard costs and pay tax only on what remains.

 

Is my flatmate covered by the Residential Tenancies Act? Not automatically. Government guidance confirms flatmates in your own home sit outside the Act unless everyone agrees in writing to contract in. Disputes between you go to the Disputes Tribunal.

 

How much should I charge for a room? Anchor on Tenancy Services' market rent data for your area — it's built from real bonds lodged over the previous six months — then adjust for the room, the shared spaces, and (for board) the food and bills included. It's a guide, not a rulebook.

 

Will renting out a room affect my benefit or Accommodation Supplement? It can, and you must declare it. MSD counts 62% of board payments as the accommodation portion, which reduces the accommodation costs behind your housing subsidy; any amount above your accommodation costs counts as income. Since 2 March 2026, public housing tenants also have 62% of board added to their Income Related Rent.

 

Do the healthy homes standards apply to my flatmate's room? The healthy homes standards attach to tenancies covered by the Residential Tenancies Act, and all such rentals have had to comply since 1 July 2025. A flatmate arrangement in your own home sits outside the Act — but a warm, dry, ventilated room is still the standard worth meeting, and it's what good flatmates pay for.

 

What notice do I have to give a flatmate to move out? Whatever your written agreement says — there's no statutory period for arrangements outside the Act, which is why the government's flat-sharing agreement template asks you to set one. Agree the number before move-in, not during an argument.

This article is general information, not legal, tax or financial advice. Rules change and individual circumstances differ — confirm your position with Inland Revenue, Work and Income, Tenancy Services, or a qualified professional before acting.