DQTB & Anor v FC of T – Carrying on a business

As tax professionals, it’s essential that we keep ourselves updated with recent cases and their implications.

In a recent case, two individual taxpayers who owned a property in Tasmania set up a company to run a grazing business.

The company paid the individuals an agistment fee of $20,000 per annum, which they loaned back to the company.

The taxpayers claimed significant tax deductions for expenses related to carrying on a business, but the Commissioner limited deductions to the agistment income of $10,000 each.

The key issue under consideration was whether the taxpayers were carrying on a business.

As tax professionals, we know that it’s not necessarily any one factor that determines whether a business is being carried on, but a combination of all the facts and circumstances.

Factors that pointed in favour of carrying on a business included a degree of systematic, business-like behaviour and a reasonable fee for agistment.

However, factors against carrying on a business included absence of a profit-making purpose, an uncommercial arrangement for payment of the fee, and lack of evidence of agreed care services.

This case is a good reminder of the importance of carefully considering all the relevant facts and circumstances when deciding whether an entity or individual is carrying on a business.

It highlights that having a profit-making purpose, conducting transactions in a commercial manner, and maintaining proper documentation are crucial in demonstrating that a business is being carried on.

If you have any questions, please feel free to reach out to our Tax Specialists today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.