| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your written advice
Authorisation Number: 1012786742356
Ruling
Subject: Business and property investment
Question
Are you carrying on a business of renting properties?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2014
Year ending 30 June 2015
The scheme commences on:
1 July 2013
Relevant facts and circumstances
Partner 1 and partner 2 own a significant number of residential apartments that are leased to residents mostly on a short term basis.
Partner 1 and partner 2 also own a small number of commercial properties which are leased.
Partner 1 manages, maintains and repairs the apartments and commercial properties on a full time basis and lives on the income generated from these activities.
Relevant legislative provisions
Income Tax Assessment Act 1997 995-1.
Reasons for decision
Summary
Weighing the factors provided in Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production and Taxation Ruling IT 2423 Withholding tax: Whether rental income constitutes proceeds of business - permanent establishment - deduction for interest against your circumstances, the Commissioner is satisfied that you are carrying on a business of renting properties.
Detailed reasoning
The question of whether a business is being carried on is a question of fact and degree. The courts have developed a series of indicators that are applied to determine the matter on the particular facts.
TR 97/11 provides the Commissioners view of the factors used to determine if a taxpayer is in business for tax purposes.
No one indicator is decisive. The indicators must be considered in combination and as a whole. Whether a 'business' is carried on depends on the large or general impression.
IT 2423 considers when renting properties constitutes a business for tax purposes.
The conclusion that an individual is carrying on a business of letting property largely depends upon the scale of operations. An individual who derives income from the rent of one or two residential properties would not normally be thought of as carrying on a business. On the other hand if rent was derived from a number of properties and management of those properties was handled by the taxpayer it would indicate the existence of a business.
Application to your circumstances
In your case, you derive rental income from a significant number of properties (residential apartments and commercial properties). As you perform most of the activities required to manage, maintain and repair the properties, the scale of your activities adds weight to the overall impression that you are carrying on a business. Accordingly, the Commissioner considers you are carrying on a business of renting properties.
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
