Private ruling: Small business concessions - active asset test
Date of advice: 16 June 2023
Published: 7 August 2023
Ruling period: Year ending 30 June 2021
Date scheme commenced: 1 July 2021

Ruling: Q1: Is the income derived by the partnership in its self-storage shed business from its customers considered to be in the nature of 'rent' for the purpose of the active asset test in section 152-40 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: No. Based on the information provided, the customers who hired the storage units did not have exclusive possession of storage sheds, but merely a right to enter and use them for certain purposes. That is, a tenant/landlord relationship did not exist, and the amounts received for the storage hire were not rent. As such the exclusion under paragraph 152-40(4)(e) of the ITAA 1997 will not apply.

Relevant facts and circumstances: You purchased land and later constructed storage sheds on the land. The property was used solely for the conduct of the self-storage business. You traded as the business via a partnership throughout the entire period. There are XX storage sheds on the property. A camera surveillance system, a security gate and security lights were installed on the property. The storage sheds were operated and directly managed by you without an agent for a number of years. Then you engaged a local real estate agent to manage the units. During the period in which the storage sheds were operated and directly managed by you, the front security gate of the property was opened in the morning and closed at sunset, under a 'daylight hours' style of operation. If tenants had an issue after hours, they could call you, and if their request was of an emergency or somewhat reasonable nature, you would grant the customer access. During this same period, a security contractor conducted a twice-nightly patrol of the property. The contractor was arranged by you and paid for via the partnership. There was no office building or staff on site, however, customers would meet up with you to pick up and drop off keys, or to report any issues. You also sold various locks to customers. The customers paid a fee for the purpose of storing their goods in an allocated shed on a temporary basis. It did not give them access to any other shed, or any other area on the premises (i.e., the customers do not have exclusive use of the overall area). There were many customers, and they could only enter the property for the specific purpose of accessing their allocated shed in a timely manner and then leave. The contract of sale date was in the income year 2020.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 152-35 | Income Tax Assessment Act 1997 section 152-40