Private ruling: Application of subsection 70-105(5) of ITAA 1997
Published: June 2012
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Can you make an election under subsection 70-105(5) of the Income Tax Assessment Act 1997 (ITAA 1997) in regards to the trading stock of the livestock breeding activity? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 75-105(5)

Reasons for decision: Summary: A 'primary production business' is defined in subsection 995-1(1) of the ITAA 1997 as a business of maintaining animals for the purpose of selling them or their bodily produce. Relevant indicators of a primary production business include: · whether the activities have a significant commercial purpose; · the size and scale of the activities; · whether the activities result in a profit and, in those cases where no profit is produced, whether the taxpayer has a genuine belief that eventually the activities will be profitable; · whether the activities are of the same kind or carried on in the same way as those which are characteristic of ordinary trade in the line of business in which the venture is made; · whether there is repetition and regularity of the activities; · whether the activities are conducted in a systematic and business like manner; and · whether the taxpayer has had prior experience in related business activities. Subsection 70-105(5) of the ITAA 1997 allows the legal personal representative to make an election only if the business is carried on after the death of the taxpayer and the trading stock continues to be held as trading stock of that business, or the asset continues to be held as an asset of the business. Applying your facts to these rules it is considered that you can make an election under subsection 70-105(5) of the ITAA 1997. The livestock which were the trading stock in the business will be held and maintained by the estate for the purpose of selling them at a profit. In effect it is a continuation of the previous activity which was of sufficient scale and conducted in a manner that it was considered a business. It is your intention to wind the business up by gradually selling all the stock, but a business is being carried on for a period of time by the estate and therefore will meet the requirements of subsection 70-105(5) of the ITAA 1997.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: The deceased carried on a substantial primary production business of breeding and selling livestock. | It is the intention of the deceased's executor to maintain and gradually sell the livestock that was the trading stock of the business, including natural increase.