For 2016 and 2017 tax returns the ATO has just announced that “bucket companies” may very well be a small business and that there is lack of clarity around the recent budget changes to small business company tax rates.

The ATO has stated that it is not possible to definitively state whether a particular company is carrying on a business.

Rather, it is a question of fact and is based on the overall impression of the activities of a company and the relevant indicators of whether a business is carried on.

However, where a company is established and maintained to make profit for its shareholders, and invests its assets in gainful activities that have a prospect of profit, then it is likely to be carrying on business. This is so even if the company's activities are relatively passive, and its activities consist of receiving rents or returns on its investments and distributing them to shareholders.

Source: CPA Australia