An asset whose main use by the taxpayer is to derive rent cannot be an active asset (unless this main use was only temporary).<\/p>\n

It has been argued that this exception does not apply to properties where the taxpayer carries on a business of leasing properties, but rather only to passive investment assets. The AAT had previously rejected this argument, stating clearly that it does not matter if the taxpayer is in the business of leasing properties or not.^{3<\/sup><\/p>\n}

There is no statutory definition of rent that is relevant in this context so the term takes on its common law meaning.<\/p>\n

Where there is a question of whether the amount paid constitutes rent, a key factor to consider is whether the occupier has a right to exclusive possession of the property. If such a right exists, the payments involved are likely to be rent. Conversely, if the arrangement allows the occupier only to enter and use the premises for certain purposes and does not amount to a lease granting exclusive possession, the payments involved are unlikely to be rent.<\/p>\n

Other relevant factors include the degree of control retained by the owner, the extent of any services performed by the owner (such as room cleaning, provision of meals, supply of linen and shared amenities) and the length of the arrangement.<\/p>\n

Example 3: Payments for use of a commercial storage facility were not rent^{4
\n<\/sup><\/strong>Christine carries on a business of providing commercial storage space. Each space is available for hire periods of one week or more. She provides office facilities, on-site security, cleaning and various items of equipment for sale or loan.<\/p>\n}

The agreements provide that in certain circumstances Christine can relocate the client to another space or enter the space without consent and that the client cannot assign the rights under the agreement. Having regard to all the circumstances, the ATO concluded that the amounts received by Christine were not rent.<\/p>\n

Example 4: Payments for occupancy of boarding house were not rent^{5
\n<\/sup><\/strong>David operates an eight-bedroom boarding house. The average length of stay is four to six weeks. Visitors are required to leave the premises by a certain time and David retains the right to enter the rooms. David pays for all utilities and provides cleaning and maintenance, linen and towels and common areas such as a lounge room, kitchen and recreation area. The ATO concluded that the amounts received by David were not rent.<\/p>\n}

Example 5: Payments for occupancy of holiday apartments were not rent^{6
\n<\/sup><\/strong>Linda owns a complex of six holiday apartments, advertised collectively as a motel. Each is booked for periods not exceeding one month, with most bookings being for less than one week.<\/p>\n}

Guests do not have exclusive possession of their apartment, but rather only a right to occupy on certain conditions. Clean linen, meal facilities and cleaning are provided to guests. The ATO found that Linda\u2019s income was not rent.<\/p>\n

Example 6: Payments for short stays in a caravan park were not rent^{7
\n<\/sup><\/strong>The taxpayer owned and operated a caravan park that consisted of fully-furnished self-contained cabins, caravans set up on blocks and sites for guests with their own caravans.<\/p>\n}

Guests also had access to a shared amenities block. Interestingly, the ATO ruled that short-term guests (those staying less than three months) did not pay rent while long-term guests (three months or longer) did.<\/p>\n

Example 7: Payments for occupancy of mobile home park were rent^{8
\n<\/sup><\/strong>The taxpayer owned and operated a mobile home park that consisted of 77 sites and a \u201ccommunity hall\u201d with shared facilities such as a kitchen, toilet and recreation area. In reaching the conclusion that the payments for use of the park were rent, the AAT found that the following factors were relevant; the park owner agreed to give vacant possession to a resident on a certain date, the resident was granted exclusive possession and had the right of quiet enjoyment, and the residential site was occupied as the resident\u2019s \u201cprincipal place of residence\u201d.<\/p>\n}

Example 8: Payments for short stays in holiday unit were rent^{9
\n<\/sup><\/strong>The taxpayer owned a holiday home that was used to provide short term tourist accommodation (that is, stays of about one to two weeks). Crockery, cutlery and linen were provided but cleaning was done only after the occupants departed.<\/p>\n}

The AAT found there to be little doubt that the occupants regarded themselves as having rented the unit for the period of their stay and as having exclusive possession. Therefore, the payments did constitute rent.<\/p>\n