Rental (passive) income and ‘carrying on a business’ for JobKeeper eligibility

Neville Birthisel

When assessing eligibility for JobKeeper assistance, the first question that must be answered is whether the entity is carrying on a business as at 1 March 2020. 

This question is of particular relevance to entities that have solely or predominantly rental income (other than input taxed supplies). Rental income and its nexus to carrying on a business was considered in Cripps v FC of T 99 ATC 2428 as cited in GSTD 2000/9. In that Administrative Appeals Tribunal case it was noted that “the letting of a property by itself is an activity in the nature of investment rather than a business, or an adventure or concern in the nature of trade”.

By way of, to some degree, a counterpoint to the Cripps case were the High Court cases of Martin v Commissioner of Taxation (Cth) [1953] HCA 100 and Brookton Co-operative Society Ltd v FCT [1981] HCA 28, both cited in TR 2019/1, in which it was stated that “whether the activities of an entity constitute the carrying on of a business is a question of fact, and must be answered based on a wide survey, and the overall impression gained, of the activities of the entity having regard to the indicia of carrying on a business as a whole”.

The moral of the story is that where an entity with rental income, or more generally passive income, is concluding on the question of whether it is carrying on a business, comprehensive analysis and documentation must be undertaken, particularly where the conclusion is in the affirmative.

This analysis may be irrelevant for entities making solely input taxed supplies (for example, the supply of residential premises) as these supplies are excluded from the determination of a decline in turnover.

Website Comments

  1. Simon Au
    Reply

    Will Air BnB or fully furnished serviced houses through a travel/tourism platform be a ‘business”? Cleaner has to be arranged each time and utilities such as tea and coffee are supplied.

    • Neville
      Reply

      Hi Simon. Whether or not an entity is carrying on a business will need to be considered on a case by case basis based on the particular facts and circumstances. However I do note GSTD 2000/9 which at paragraph 6 states “the letting of property by itself is an activity in the nature of investment rather than a business, or an adventure or concern in the nature of trade”.

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