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Edited version of private advice
Authorisation Number: 1052099062356
Date of advice: 22 March 2023
Ruling
Subject: Am I in business - leasing commercial rental properties?
Question
Are you carrying on a business of leasing commercial rental properties?
Answer
Yes.
Having considered your circumstances and applying Taxation Ruling TR 2019/1 Income tax: when does a company carry on a business?, we determined that your activity has sufficient size, scale, and permanency and that it is regular and repetitious. It is planned, organised and carried on in a business-like manner and is the same kind carried on in a similar manner to that of ordinary trade in that line of business. We accept that your company is carrying on a business of leasing commercial rental properties.
This ruling applies for the following period:
Year ended 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You operate under a company structure.
You purchased 2 commercial premises prior to the Covid19 pandemic.
You purchased the properties with leases in place. The purchase was as a going concern.
You acquired the commercial properties as they have better returns than residential properties.
The properties have been leased out since acquiring them, with each shop having their own lease agreement.
Your typical lease is 5 years, plus the option to extend for another 5 years. You provided us with details around the current lease agreements for both commercial properties.
Leasing of the 2 commercial properties is your only activity.
Your real estate agent manages the properties.
The tenants are responsible for cleaning their respective property that they lease. Any structural or major issues, come to you first, such as water ingress. Any general repairs required goes through your real estate agent and the strata. Your real estate agent will email you first, then you approve the works. Your real estate agent then organises the repairs, and you then pay for them.
The properties are leased at market rate on normal commercial terms to unrelated third-party tenants.
You visit the properties on an adhoc basis.
Your real estate agent conducts inspections and collects rent. Each tenant deposits the rent into the bank account of your real estate agent.
You provided us with your annual turnover figure.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 995-1