Taxation Ruling IT 207 - Peanut sharefarming partnerships facts



Ruling: 3. Broadly, the peanut sharefarming arrangements have features not unlike those based on cattle leasing arrangements and afforestation ventures. There have so far been three basic ventures reviewed which provide for a potentially large tax deduction to the "investor" in the first year of operation, a minimum return of income during the currency of the agreement and a return of funds plus profit some years later under the guise of capital. 4. It is presently not accepted that the "farmer" and the "investor" carry on a business in partnership. It would appear that the "farmer" merely advises the "investor" of what he has done and what he proposes to do. There is no specific right for the "investor" to do anything but contribute his funds and receive his share of the profits. The alleged partners do not appear to be carrying on business in common nor to be in receipt of income jointly. The "farmer" has usually been in business as a peanut grower on his own account prior to the advent of the scheme and there is a clear inference that he intends to continue to run the business by himself. The "farmer" receives the income and disburses it; the "investor" has no say whatever. 5. In summary, the arrangements appear to be that the "investor" is simply investing funds for an 8 or 10 year period at a rate of return varying with the profitability of their use, with a right to withdraw his investment subject to a penalty as he wishes. 6. In view of the foregoing, it should not be accepted at this stage that the "investor" is carrying on a business in relation to the venture. Accordingly, all claims for deductions relating to such ventures should be disallowed. Claims may relate to the income year ended 30 June 1977 and later years. COMMISSIONER OF TAXATION 9 February 1979




An arrangement has been proposed in which a farmer enters into a series of partnership agreements with investors in a peanut farming venture. The main details of the partnership agreements are - | 2. In addition, provision has been made for the termination of the partnership and the several arrangements are - | Date original memo issued: 09.02.79


Legislative references: 6
Subject references: DEFINITION - PRIMARY PRODUCTION PEANUT SHAREFARMING SHAREFARMERS