Private ruling: Primary production business
Published: February 2014
Ruling period: Year ended 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2012

Ruling: Q1: Am I in the business of primary production? | A1: Yes


Relevant legislative provisions: Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision: Summary: In part, subsection 995-1(1) of the Income Tax Assessment Act 1997 defines primary production as cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment or maintaining animals for the purpose of selling them or their bodily produce (including natural increase). In your case your activities of breeding animals for sale meets the definition of primary production. It must now be determined if you are in business. Taxation Ruling TR 97/11 discusses the issues to be considered in determining whether you are carrying on a business of primary production. Paragraph 13 of TR 97/11 lists the following indicators as relevant: · whether the taxpayer has more than just an intention to engage in business · whether the taxpayer has a purpose of profit as well as a prospect of profit from the activity · whether there is repetition and regularity of the activity · whether the activity is of the same kind and carried on in a similar manner to that of the ordinary trade in that line of business · whether the activity is planned, organised and carried out in a business-like manner such that it is directed at making a profit · the size, scale and permanency of the activity · whether the activity is better described as a hobby, a form of recreation or a sporting activity · whether the activity has a significant commercial purpose or character; this indictor comprises many aspects of the other indicators. Other indicators which support the main indicators include: · whether records are kept · whether a business plan exists · whether there has been commercial sales of the product · the taxpayer's knowledge or skill. In your case your goal is to make a profit from selling animals. You have a business plan which details how you will make the farm profitable. It is estimated your farm will be a profitable primary production business in the not too distant future. You have demonstrated that there is repetition and regularity in your activities. Your activities are of the same kind as carried on in the farming industry. You have gained experience over many years. Your activities are carried out in a planned and organised fashion. You have a business plan and have followed it since its inception. There will be commercial quantity of sales of the product in the coming years. It is considered that you are in the business of primary production.

Relevant facts: You have been involved in farming for many years. | You intend to grow animals which are low maintenance. | During the growth stage all baby animals will be retained for breeding to build breeder numbers quickly. Once full capacity is attained females will be sold to increase revenue. | You are using this part of the property for stud purposes and the other part for growing animals for slaughter. | You have the required equipment to successfully operate the farm. | In the 2012-13 financial year you purchased a large number of animals