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07 Jun 1010 AAT orders Commissioner to make personal services business determination - Yalos

On the remittance of the matter to the AAT by the Federal Court, the AAT has affirmed its original decision that the Commissioner should make a personal services business determination in favour of the taxpayer, on the basis that he should be satisfied that, but for unusual circumstances applying to the taxpayer in the relevant year of income, the taxpayer could reasonably have been expected to meet the unrelated clients test in s 87-20 ITAA 1997.

The matter was remitted to the AAT by the Federal Court because the Court held, in its original decision, the AAT had overlooked the need for the taxpayer to satisfy the requirement of the unrelated clients test in s 87-20(1)(b), namely, that "the services are provided as a direct result of the individual or personal services entity making offers or invitations (for example, by advertising), to the public at large or to a section of the public, to provide the services..."

The AAT found, at para 19:

"It was the further evidence of Mr Koundouras [a director and employee of the taxpayer] that his expertise is relevant to a very small number of companies engaged in offshore petroleum exploration and mining. As a consequence advertising in a general sense of advertising in newspapers, brochures or other medium is clearly inappropriate in this context. I am satisfied that those companies constitute a section of the public. Further, I am satisfied that a regular personal contact with those companies within the industry to assess their needs and the opportunity to provide specialised services via word of mouth and personal recommendations from others in the industry constitute making offers or invitations to provide services."

Yalos Engineering Pty Ltd and FCT [2010] AATA 408 (AAT, Pascoe SM, 3 June 2010).


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