Private ruling: Am I carrying on a business?
Date of advice: 21 April 2023
Published: 5 June 2023
Ruling period: 30 June 20XX
Date scheme commenced: 5 August 20XX

Ruling: Q1: Is the taxpayer carrying on a business of primary production? | A1: Yes. You meet the relevant factors contained in Taxation Ruling TR 97/11. Further information about carrying on a business can be found by searching 'QC 31733' on ato.gov.au

Relevant facts and circumstances: You are a partnership who operates a timber plantation. The partnership was established in the year ended 30 June 20XX. You acquired a property with a house in the year ended 30 June 20XX. The property has a council zoning C4 which allows for a timber plantation business to be conducted. You calculated that 70% of the land is usable for the timber plantation with a capacity for around 500 to 700 trees. A valuation of the land (excluding buildings) has been obtained. You decided to establish a plantation for Australian native hardwoods which will then be harvested for timber. The timber will then be supplied to furniture makers and builders. You prepared a business plan in the year ended 30 June 20XX. In preparing the business plan you consulted with existing businesses for advice and prices of timber varieties. You estimate a time span of 10 to 20 years for harvesting with the intention to replant on harvest to maintain a continual business. You incurred the majority of expenses in the first year with fencing and irrigation infrastructure being installed. The partners plan to see the plantation though the harvest process and beyond. You have obtained an authorisation for a timber plantation from the NSW Department of Primary Industries. You obtained a water access licence to irrigate the trees using a nearby creek as a source. During the year ended 30 June 20XX you incurred costs to setup an irrigation system, fencing and, plant and equipment. You planted XX seedlings consisting of several native Australian hardwood trees. You have planted additional seedlings following the year ended 30 June 20XX. You planted each tree with 250cm spacing from trunk to trunk. This spacing allows for clearing and maintenance between the trees therefor lowering the brush fire risk, increasing the nutrient uptake and lowering the cost of fertiliser. You plan to plant at a rate of XX to XX trees per year. You have spent 7 to 8 weeks on establishing secure fencing to protect the property from wildlife and 40 hours on establishing an irrigation system. You expect to spend 6 to 8 hours a week on weed suppression, monitoring irrigation and inspecting the seedlings for pests throughout the year. During the winter months you expect this to drop to 4 to 6 hours a week. You maintain your business records on spreadsheets and are investigating moving into a computerised accounting system. You provided financial information for future yearly costs. You provided information regarding growth rate of trees. You estimate a profit in the year ended 30 June 20XX.

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