Decision impact statement
Dixon Consulting Pty Ltd and Commissioner of Taxation
Venue: Administrative Appeals Tribunal
Venue Reference No: NT2007/0568
Judge Name: Deputy President Purvis
Judgment date: 21 September 2007
Appeals on foot:
Impacted Advice
Relevant Rulings/Determinations:
Subject References:
Income tax
personal services business determination
whether the company met the business premises test
whether the company had exclusive use of the business premises
whether the business premises was physically separate from any premises used by the applicant's employees or the employees' family for private purposes
 This document is not a public ruling, but provides a statement of the Commissioner's position in relation to the decision and how the law will be administered as a consequence of the decision. Any proposals for changes in the law are matters for government and it is not appropriate for the Commissioner to comment. |
Précis
The case concerned whether the Applicant satisfied the business premises test and as a result was entitled to a personal services business determination from the Commissioner.
This was the first case to consider the application of the business premises test in section 87-30. The findings of the Federal Court and the Tribunal confirm the ATO view in ruling TR 2001/8.
Decision Outcome: Favourable
Appeal on foot: No
Brief summary of facts
The Company applied for a personal services business determination for the year ended 2002 on the basis that it satisfied the business premises test.
In the application, the Company stated that the loft above the Garage on the principal employee's residential property was the business premises. The Garage and the Dwelling shared the same title and there was only one driveway for the whole property.
The Commissioner refused to make the determination on the ground that the business premises test was not satisfied. The Applicant failed the test because the business premises were not physically separate from the premises used for private purposes.
At the first AAT hearing, the Applicant argued that the entire Garage building was the business premises. As a result the Respondent contended the Applicant failed the business premises test on a further ground; that being the Applicant did not have exclusive use of the business premises because the Applicant's employees and their children stored personal items in the Garage and the cars that were parked in the Garage were used by the Applicant's employees for private purposes.
The Tribunal considered two questions: firstly, whether the Applicant had exclusive use of the business premises; and secondly, whether the business premises was physically separate from any premises used by the Applicant's employees or the family of the Applicant's employees for private purposes.
The Tribunal set aside the Respondent's decision in first instance. The Commissioner appealed to the Federal Court and the appeal was upheld. The Federal Court remitted the matter back the Tribunal for further consideration.
Issues decided by the tribunal
- Whether the company met the business premises test?
- Whether the company had exclusive use of the business premises?
- Whether the business premises were physically separate from any premises used by the applicant's employees and their family for private purposes?
Tax Office view of Decision
Exclusive use
The Tribunal was satisfied on the basis of the evidence before it, that the use of the Garage by the Dixon family was not de minimis use and was not "so slight that it should be ignored".
Accordingly the Tribunal concluded that the Applicant did not have exclusive use of the Garage area in the sense expounded by the Federal Court, and therefore the Applicant failed the business premises test.
Physically Separate
In light of the Tribunal's finding on exclusive use, the Tribunal did not find it necessary to consider whether the Garage was physically separate from the private premises. However, the Tribunal did observe that it was doubtful the Garage, comprising the office, store and workshop areas, could be considered as premises physically separate from the remainder of the Dural Property. This is because there is no physical separation between the office, store and workshop areas and the rest of the Dural Property.
Administrative Treatment
Implications on Law Administration Practice Statements
None
Court citation:
[2007] AATA 1786
2007 ATC 2550
67 ATR 257
Legislative References:
Income Tax Assessment Act 1997 (Cth)
87-15
87-30