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1 Are the vehicles and other items of plant and equipment owned by the Company used in the business considered active assets for the purposes of section 152-35 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Yes This ruling applies for the following period: Income tax year ending 30 June 20XX The scheme commenced on: 1 July 20XX

1.               The Company was established on XX XX 20XX. 2.               The Company is a well-established provider of a wide range of vehicle hire and other related services across Australia. 3.               The Company specialises in offering a comprehensive fleet of vehicles. 4.               In addition to hire services, the Company provides additional services including sales. 5.               The Company insures the vehicles and provides standard Loss and Damage cover to customers in its rates. 6.               Customers may be able to reduce their liability in the event of an accident by purchasing an additional Risk Reduction option or can decline the insurance cover provided by the Company if the customer holds a comprehensive policy of insurance with a reputable insurer that insures the vehicle until it is returned or recovered. 7.               The Company also offers fleet management services for longer-term hire periods.

8.               The standard hire agreement outlines conditions for vehicle hirers regarding how the vehicles should be used. Customers are restricted from using the vehicles in a way that would void the Company's insurance coverage, driving the vehicle on a tidal beach, in a mine or quarry pit, or underground unless given written permission from the Company and cannot use the vehicle outside what is allowed as specified in the agreement. The hire agreement can also restrict the number of kilometres that can be driven in a full term of hire. 9.               The standard service agreement grants the Company the right to recover the vehicle at any time and terminate the service agreement if it suspects the vehicle has been damaged or may have caused damage to a third party. 10.            The hire agreement also requires renters to return the vehicle to the Company or its service agent for servicing if servicing is included in the hire agreement.

11.            The hirer must not lease, bail or part with possession of the vehicles nor allow any security interests to be created in respect of the vehicle during the hire period and the hirer must not permit any other unauthorised person to drive the vehicle. 12.            The vehicles and plant and equipment owned by the Company are used in the business of the Company from the date of acquisition until the date of disposal.

section 108-5 of the Income Tax Assessment Act 1997 section 118-5 of the Income Tax Assessment Act 1997 section 152-35 of the Income Tax Assessment Act 1997 subsection 152-40(1) of the Income Tax Assessment Act 1997 paragraphs 152-40(4)(a) to 152-40(4)(d) of the Income Tax Assessment Act 1997 paragraph 152-40(4)(e) of the Income Tax Assessment Act 1997

Issue 1 Question 1 Summary The amounts received by the Company for the vehicle hire and other related activities are not rent in the context of paragraph 152-40(4)(e) of the ITAA 1997. This is because as is explained in TD 2006/78, the CGT assets for which the payments are received are not land or buildings. Therefore, in income years the CGT assets are used or held ready for use by you in the carrying on of your business, they are active assets within the meaning of section 152-40 of the ITAA 1997 and for the purposes of the testing in section 152-35 of the ITAA 1997. Detailed reasoning Under subsection 108-5(1) of the ITAA 1997 a CGT asset is any kind of property or a legal or equitable right that is not property, which includes cars, motor cycles and similar vehicles. Under section 118-5 of the ITAA 1997 cars are excluded from the CGT regime, but are not excluded from being a CGT asset. Subsection 152-35(1) of the ITAA 1997 states a CGT asset satisfies the active asset test if: a)               you have owned the asset for 15 years or less and the asset was an active asset of yours for a total of at least half of the period specified in subsection (2); or

b)               you have owned the asset for more than 15 years and the asset was an active asset of yours for a total of at least 7.5 years during the period specified in subsection (2). The specified period under subsection 152-35(2) of the ITAA 1997 begins when the asset is acquired and ends at the CGT event. Under subsection 152-40(1) of the ITAA 1997, a CGT asset is an active asset if it is owned and used, or held ready for use, by you, your affiliate, or another entity that is connected with you in the course of carrying on a business that is carried on, whether alone or in partnership. Various exclusions apply under paragraphs 152-40(4)(a) to (d) of the ITAA 1997 but none of these are applicable on the facts here. Under paragraph 152-40(4)(e) of the ITAA 1997 an asset whose main use is to derive rent cannot be an active asset. Paragraph 22 of Taxation Determination TD 2006/78

Income tax: capital gains: are there any circumstances in which the premises used in a business of providing accommodation for reward may satisfy the active asset test in section 152-35 of the ITAA 1997 notwithstanding the exclusion in paragraph 152-40(4)(e) of the ITAA 1997 for assets whose main use is to derive rent? (TD 2006/78) explains: Whether an asset's main use is to derive rent will depend on the particular circumstances of each case. The term 'rent' has been described as follows: •                 the amount payable by a tenant to a landlord for the use of the leased premises ( C.H. Bailey Ltd v. Memorial Enterprises Ltd [1974] 1 AII ER 1003 at 1010, United Scientific Holdings Ltd. v Burnley Borough Council [1977] 2 AII ER 62 at 76, 86, 93, 99); •                 a tenant's periodical payment to an owner or landlord for the use of land or premises ( The Australian Oxford Dictionary , 1999, Oxford University Press, Melbourne); and

•                 recompense paid by the tenant to the landlord for the exclusive possession of corporeal hereditaments..... The modern conception of rent is a payment which a tenant is bound by contract to make to his landlord for the use of the property let (Halsbury's Laws of England 4 th Edition Reissue, Butterworths, London 1994, Vol 27(1) 'Landlord and Tenant', paragraph 212). Application to your circumstances In this case, the Company provides vehicle hire and other related activities across Australia. The relevant CGT assets are the cars and other plant and equipment held by the Company for use in its business. The amounts received by the Company for the vehicle hire and other related activities are not rent in the context of paragraph 152-40(4)(e) of the ITAA 1997. This is because as is explained in TD 2006/78, the CGT assets for which the payments are received are not land or buildings. Therefore, in income years the CGT assets are used or held ready for use by you in the carrying on of your business, they are active assets within the meaning of section 152-40 of the ITAA 1997 and for the purposes of the testing in section 152-35 of the ITAA 1997.