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The curious case of Mrs Bowerman


A recent AAT decision has examined the threshold test in the Myer Principle and how it relates to the acquisition of a private residence acquired for a ‘profit-making purpose’.

By Phillip London 15 minute read

In a recent decision by the Administrative Appeals Tribunal (the Tribunal), Bowerman and the Commissioner of Taxation [2023] AATA 3547 (Bowerman), the question of the threshold test in the Myer Principle and its relationship to the acquisition of a private residence acquired for a “profit-making purpose” was tested. 

The outcome was that losses incurred by a taxpayer on the disposal of the property, notwithstanding that it had been her private residence, were held deductible to the taxpayer.

The result was an apparent ‘win’ for the taxpayer. The commissioner has not appealed the decision. Is it also a ‘win’ for the commissioner?



The facts of Bowerman were as follows:

  1. In 2015 Mrs Bowerman contracted to construct a dwelling in Woolooware Bay, NSW. The property would not be completed until 2020.
  2. In 2017, becoming aware of the potential profit to be made from the capital growth of other properties in Woolooware she acquired another property (the Dune Walk property) in the estate. 
  3. Mrs Bowerman’s intention concerning the acquisition of the Dune Walk property was to ultimately sell it and apply the proceeds to the planned dwelling acquired in 2015.
  4. Mrs Bowerman lived in the Dune Walk premises as her private residence for 26 months.
  5. In April 2020, the Dune Walk premises were sold at a loss: $266k (due to the impact of COVID-19). The loss was deducted from Mrs Bowerman’s assessable income for the 2020 income year. 

The matters before the Tribunal concerned the following:

  1. Was the loss made on the sale of the property at Dune Walk deductible to Mrs Bowerman based on the Myer principle? That is, did the taxpayer have the requisite intention at the time of the acquisition of the Dune Walk property to derive profit on its sale?
  2. In furtherance of the Myer principle – were the transactions undertaken by Bowerman commercial in nature or the ‘sort of thing’ that a business-like person enters and/or undertakes? What is the threshold in determining such a question?
  3. Did the fact that Mrs Bowerman resided in the Dune Walk premises as her private residence alter the outcome or change the character of the transaction concerning the taxpayer’s contention that the transaction was one of commercial substance? That is, because Mrs Bowerman resided in the premises did that alter the character of the transaction to that of private?
  4. When was the loss incurred? That is, is a ‘loss’ incurred concerning an asset sale at the time of settlement of the sale contract (i.e. it is at that time a realised loss), or at the time of entering the contract (at which the time the taxpayer has an unrealised loss?)


Senior Member Lazanus found in favour of Mrs Bowerman on all primary matters. The loss was deductible. The fact that Mrs Bowerman lived in the property as her private residence did not displace the primary motive of entering the transaction to profit from its sale. The loss was incurred on the entering of the sale contract, predicated on the binding public ruling as issued by the Commissioner (Taxation Ruling TR 97/7). A taxpayer is entitled to rely on such rulings in determining their taxation position. Absent the ruling, the Member would have found that that ‘loss’ was incurred at the time of settlement (consistent with that of the revenue position where the proceeds are considered revenue not capital).

The key points

The key points of the case are the following:

The threshold test with regard to the Myer Principle

In common practice, the question concerning the Myer Principle and its application to non-business taxpayers entering such a transaction is – what does the taxpayer need to do to ensure that the transaction meets the respective tests concerning deriving profit ‘in carrying out a business operation or commercial transaction’?

Concerning this question, Bowerman follows the decision in Greig v Commissioner of Taxation [2018] FCA 1084 (Greig). Ultimately, the threshold is quite low. Provided that the features or factors prevalent in the undertaking of a transaction are that of the sort that a businessman or man in trade may enter, the threshold test is passed (see Greig paragraph 241 and Bowerman at paragraph 85).

In terms of a taxpayer documenting such an approach, it is relevant to note that Mrs Bowerman’s evidence in formulating her motivation is limited to correspondence and interaction with the estate’s sales office and the ‘impression’ she gained concerning prospective opportunities in acquiring property in that estate (paragraph 32). A formally documented or constructed series of objective analyses concerning her reasoning was not required to meet the threshold.

The reconciliation between the Myer Principle and the use of the property as a private residence

As stated, Mrs Bowerman lived in the property as her private residence. The Commissioner argued that as a ‘matter of common sense’ the loss incurred was domestic.

The Tribunal determined that notwithstanding Mrs Bowerman having lived in the property, her intention, was to make a profit on the sale of the unit when she sold it, and despite her having resided in the unit, that characterisation did not change. Further, and the more significant purpose, was that when she no longer needed the Dune Walk Unit and was able to settle on the purchase of the Foreshore Boulevard unit, she would sell the Dune Walk unit at a profit. This corresponded with her intention of always re-selling the Dune Walk unit. The Tribunal was therefore of the view that the characterisation of the property having been purchased by Mrs Bowerman with a profit-making intention was constant. 

To this point, the conclusion may be understood to be, that provided the intention at the time of acquisition of a property is to re-sell for profit, the transaction cannot be private. It is an error to always treat a particular type of expenditure (or loss) as ‘being absolutely or always “private”. It is self-evident that it is necessary to analyse the factual circumstances regarding the loss or outgoing in each case’ (John v Commissioner of Taxation [1989] HCA 5(1989) 166 CLR 417)(Commissioner of Taxation v Cooper [1991] FCA 190(1991) 99 ALR 703).

Nor would it appear that there is a requirement to apportion the deductible sum (section 8-1 denies a deduction to the extent that it is of a private or domestic nature). The Tribunal does not appear to have been requested to consider this issue.

A win for the commissioner?

At face value, the ‘win’ for the taxpayer may appear to open up a ‘widening’ of the revenue application and subsequent profit/loss treatment under the Myer principle. This potentially provides opportunities for loss deduction in other asset categories such as shares and cryptocurrency.

Arguably, it is also a win for the Commissioner. Particularly concerning property transactions, the lower test threshold of the Myer Principle could see revenue treatment to disposal of a taxpayer’s residence where the property has simply been bought and sold within a short period (e.g. ‘flipping’ property). Taxpayers acquiring property and renovating for sale and profit may also be subject to an expanded application of the principle (if not already). 

The argument that the Myer Principle does not apply in such instances – because the taxpayer has used the premises as their private residence – may no longer be relevant. 

It is therefore suggested that whilst the Tribunal’s decision is not precedent on a question of law, the Commissioner does now have support for pursuing taxpayers on the wider question of gains made from real property transactions.

Phillip London, senior tax trainer, Tax Banter 

Phillip London


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