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How to distinguish if you are carrying on a business of letting rental properties

14 Jan 2015

Topics

  • Business Law
  • Property

If you have rental properties that you own and either manage or are managed by real estate agents then according to the decision in YPFD v Commissioner of Taxation [2014] AATA 9, you may be carrying on the business of letting rental properties.

In the case of YFPD the court considered factors that were relevant in determining what activities constitute carrying on a business:

  1. Whether the activities carried out have a profit making intention;
  2. The complexity and magnitude of the undertaking like appointing real estate agents;
  3. Whether the taxpayer intended to trade regularly, routinely or systematically;
  4. Whether the operations are carried out in a business-like manner and the degree of  sophistication;
  5. Whether there is a discernible pattern of trading from which there arises profit and loss;
  6. The volume of the operations and the capital employed.

If on review of the above factors it is found that you are carrying on the business of letting rental properties then as the owner of the business one can claim a wide range of expenses related to carrying on the business. In addition if the owner attends courses, seminars and mentoring sessions, they can claim these costs as tax deductions. Contact our Property team for expert advice.