Dixon Consulting Pty Ltd and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (NT2007/0568)
Judgment date: 21 September 2007
Date published: 3 December 2007

Summary of decision:
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. | 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.

Overview 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? | 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?

Issues decided:
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? 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?

ATO 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:
None

Legislative references: Income Tax Assessment Act 1997 (Cth) 87-15 87-30
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