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Edited version of your written advice
Authorisation Number: 1012913482989
Date of advice: 18 November 2015
Ruling
Subject: Am I in Business - Managing Residential Property
Question
Are you carrying on a business of renting properties?
Answer
Yes
This ruling applies for the following period<s>:
Year ended 30 June 2016
Year ended 30 June 2017
The scheme commences on:
1 July 2015
Relevant facts and circumstances
The taxpayers own and manage a number of residential units of accommodation. Several of these units are leased to a single customer, for the benefit of visiting staff. There is a degree of serviced accommodation provided.
Both owners are actively involved in managing the properties. Taxpayer One, manages, maintains and repairs the apartments. Taxpayer Two maintains the accounting records for the business. Between them they spend 10-15 hours a week servicing the apartments.
Relevant legislative provisions
Section 6-5 of the Income Tax Assessment Act 1997
Section 8-1 of the Income Tax Assessment Act 1997
Section 995-1 of the Income Tax Assessment Act 1997
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 reasonable number of properties (a number of residential units of accommodation). 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.