• Business premises test

    To pass the business premises test, your business premises must meet certain location and usage criteria.

    You pass the test if at all times in the income year, your business premises meets all of the following:

    At all times in the income year means on every day during the income year in which PSI is generated. If you only traded for part of the income year, and maintained and used the premises to conduct activities for that whole period, you may still be able to pass the test.

    Your business can change premises during the year as long as, at all times, there are premises meeting the requirements of the test.

    Example

    John does consultancy work as a sole trader. He started trading on 1 February, which means, in the income year, he only traded for five months. For these five months, John did the consultancy work from an office building he rented.

    John meets this condition of the business premises test as he maintained and used a business premises for the entire time that he was trading in the income year.

    End of example

    Used mainly for personal services work

    To meet this condition, you must use the business premises mainly (that is, more than 50%) for work that generates your PSI. It is not enough to own or lease the premises and conduct activities that are unrelated to your personal services work at the premises.

    Used exclusively for your business

    To meet this condition, your business must have exclusive use of the premises.

    If your business shares or jointly leases premises with another person/business that isn't performing work for your business, this would not be considered exclusive use.

    However, if the premises are shared with parties who complete work for your business – for example, if three people perform work for your business and these three people work from the premises – it would still be considered exclusive use.

    Example

    Jane is a lawyer who earns PSI through a partnership, Smith & Hagen. The partnership leases the bottom floor of a three-storey building. The office has signage out the front, and sole use of the bottom floor. Clients can enter the office from the shared foyer.

    Jane meets this condition of the business premises test as the office space the partnership leases is exclusively used for Jane's business.

    End of example

    Physically separate from your home

    To meet this condition, the business premises must be separate from any premises which you or your associates use for private purposes. This means that business premises within private premises (for example, within your home) generally won't be considered physically separate.

    Generally, physically separate from your home means:

    • the physical appearance of the business premises is distinct and separate from adjoining or surrounding premises
    • other building structures on the land are detached from the business premises
    • access to the business premises for you and your clients is separate from access to your home
    • the adjoining or surrounding premises are not functionally incorporated into the business premises
    • facilities and staff are not shared with occupants of adjoining or surrounding premises.

    Physically separate from your clients

    The premises must also be physically separate from the premises of your clients (or their associates).

    Generally, physically separate from your clients means:

    • other building structures on the land are detached from the business premises
    • the business premises has separate external access for you and for your clients
    • there is a permanent barrier preventing internal access between the business premises and the remaining premises.

    Next steps:

    Last modified: 04 Feb 2016QC 46035