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Edited version of your written advice
Authorisation Number: 1051335963368
Date of advice: 14 February 2018
Ruling
Subject: Carrying on a business and lower corporate tax rate
Question 1
Is the company carrying on a business?
Answer
Yes
Where a company's activities have a significant commercial nature or purpose and are conducted in a commercially viable manner, they are likely to amount to the carrying on of a business. The activities carried out by the company have a purpose and prospect of profit, further the overall impression of the company’s activities suggest that it invests its assets in a gainful way. After considering the facts against the relevant indicators outlined in the draft Taxation Ruling TR 2017/D7 we consider that the company is carrying on a business.
Question 2
Is the company eligible to apply the reduced tax rate of 27.5%?
Answer
Yes
To qualify for the lower 27.5% tax rate in 2016–17 a company must meet the small business entity definition which requires them to, have an aggregated turnover of less than $10 million, and be carrying on a business. Your aggregate turnover is under $10m in the 2016-17 income year and you carry on a business, you therefore meet the conditions to be a small business entity. You therefore can apply the 27.5% tax rate under section 23 of the Income Tax Rates Act 1986.
This ruling applies for the following period
Year ending 30 June 2017
The scheme commences on:
1 July 2016
Relevant facts and circumstances
You are a company incorporated under the Corporation Act 2001(Cth).
You are the owner of X residential units from which you receive rental income
You also receive interest income earned on cash deposited in your bank account
Other than freehold land & buildings, cash at bank and some inter-entity assets, you hold no other assets.
Your aggregate annual turnover is less than $10m in the 2017 income year
The income tax returns you lodged for 2014, 2015, 2016 and 2017 income years show that you were making profit in each of those years
A licenced real estate agent is engaged to manage the X residential units you own.
Your directors are involved in various aspects of the management of the properties you own.
One of your directors is engaged on a full time basis overseeing their investment portfolios that include other related entities and the properties you own.
A permanent part-time bookkeeper is employed by an entity related to you to oversee all payments made on your behalf and to maintain your accounting records and other administrative matter.
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