Small farm as a business

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Small farm as a business

OzSledge's picture
Joined: 05/02/2018

Sorry if this has been covered before but I'm having trouble getting my head around it. I've been over the ATO website and it makes my brain hurt. I thought someone here might have some expreience with it.


I have 90 arrable acres and have a small lowline cattle heard that I intend to add to over the next 24 months. Currently I have 1 big 90 acre padock with a good dam. My plan is to devide the 90 acres into 5 padocks and build a small yard area with loading ramp cattle crush etc. also intend to update pasture condition as well as a bit of drought proofing.


I plan to breed and anually sell some cattle as well as a small amount of produce. Nothing huge as we work full time. I can't see myself reaching the requirements of becoming a primary producer for taxation pourposes. However I'm sure the Tax man will have his hand out for taxes from any aditional income I recieve from the sale of produce or direct sale of cattle. From reading the ATO website as I have a lifestile property I can't offset the cost of fencing, water supply, equipment etc etc as it's considered part of the lifestyle. This makes no sense to me, even though not a primary producer I'm still selling a product and that product comes at a cost.


So my question is can I run a small property as a small business and offset costs against income for a total profit without being a designated primary producer. In effect just run it like any other small business. I figure if I need a water trough to get water to the cattle I should be able to deduct the cost from profit from sale of the cattle.


any thoughts.


admin's picture
Joined: 28/02/2011
Hi Ozsledge,
Thanks for the question and welsome to the small farm forum.
This is a similar situation that numerous small and first time farmers find themselves in.
To give a general answer to your question. A primary producer is a small business as well, no different in a business sense to any other small business that operates in Australia. There are some additional tax benefits but otherwise they operate in the same tax structures.
There is no dollar threshold to be in business in Australia.
The main considerations for being in business are the following, 
1) is the main intention or purpose to make a profit?
2) do you regularly and repeatedly undertake your activity?
3) is the activity planned, organised and carried out in a businesslike manner?
4) is the activity being undertaken for commercial reasons?
Even if you aren’t going to make a profit in the first few years of operation, you may be operating a business if you can answer yes to most of the above questions.
If you have tax losses , these losses can be carried forward to later tax years to be claimed against your other income or profits from the farm. The ability to claim those losses though is dependent on you passing the non-commercial losses  tests.
I would do some estimates or budgets of what you think your income and expenses will be for the next two to three years, particularly around the capital costs of fencing, plant & equipment purchases and pasture renovation. Then make an appointment to see an accountant that has a number of primary producer clients, take the budgets with you and get some specific advice relevant to your circumstances.
You might also find some useful information in an article I have recently written called Hobby Farm Tax Deductions and Business Structures in Australia 
I hope this helps”
OzSledge's picture
Joined: 05/02/2018

Thanks for the reply. The article is great.


I've spoken to a couple of other people who have pretty much said the same thing. Seems I just got some bad advice from an accountant that just seemed to have a bit of a can't be bothered attitude with one of the few hobby farmers in a large farming community. I'm going to go and see an accountant about 60km from home next week in a town that has many small/hobby farmers and might get more a more informed response.


Thanks again


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