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We own farm land and lease it. Business? Rental property? (tax perspective)

Discussion in 'Accounting & Tax' started by roadworthy, 25th Aug, 2016.

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  1. roadworthy

    roadworthy Member

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    Wife and I recently purchased a few hundred acres of vacant farm land and lease it out for about $15K/year.

    It is a 50/50 partnership wife and I.

    We're getting around to filling out our first Partnership Tax Return, but when looking for basic advice on the ATO website we're getting a little confused as to what we are..!

    Is this a rental property? Rental properties | Australian Taxation Office
    Is this not a rental property, but a business? Partnership | Australian Taxation Office
    Something else?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Are you a legal partnership? Or just joint owners?
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    You should get onto your accountant asap. What type of lease has been used? What provision is there to claw back expenses eg. Rates, services charges, land tax (if you're not operating a farm/primary industry you may not qualify for the land tax exemption).
     
  4. roadworthy

    roadworthy Member

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    Well, we applied for a partnership ABN. If I recall this was so that we would have an ABN to put on the top of the invoice we send to the tenant for their lease payments... :-S
     
  5. sanj

    sanj Well-Known Member

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    get specific and paid for advice asap.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You should get legal and taxation advice asap.
     
  7. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    Do not lodge a partnership tax return where the only income derived jointly (or in common) with another person was:

    • rent from a jointly owned property
    • interest from a jointly held account
    • dividends from jointly held shares
    • and you were not in a partnership carrying on a business (in the above three instances each person shows their share of the income and expenses at the appropriate items on their own tax return).
    Partnership tax return instructions 2016 | Australian Taxation Office
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Unless it is a tax partnership?
     
  9. Daniel Taborsky

    Daniel Taborsky Well-Known Member Premium Member

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    If they weren't a tax law partnership you wouldn't need to consider the partnership return at all. But generally I think there is a tax law partnership where tenants in common have a rental property as they will normally be in receipt of income jointly.

    I read the instructions as only requiring a partnership return where the tenants in common are carrying on a business (as opposed to merely holding an investment property).
     
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  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I don't know anything about partnerships, but the legal title may not reflect the beneficial interests of the parties and the income may be split other than based on legal ownership. Not sure if this needs a partnership return or not.

    But it sounds like Roadworthy was using the term partnership jointly and probably just means joint owners.
     
  11. roadworthy

    roadworthy Member

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    Yes, upon reading this it sounds like we are merely joint owners and not carrying on a business.

    So therefore the ATO's advice directed at Rental Property owners is what we ought to be studying? Rental properties | Australian Taxation Office
     
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  12. Dean Collins

    Dean Collins Well-Known Member

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    interesting, where is it located and what sort of yield are you getting?
     
  13. roadworthy

    roadworthy Member

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    NSW South West and we're getting about 2.5%

    :)
     
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  14. Redwing

    Redwing Well-Known Member

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    For the Tax Specialists

    What would be the best entity for flexibility, tax, future family planning to hold farmland or such a property in?
     
  15. Scott No Mates

    Scott No Mates Well-Known Member

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    @roadworthy - have you asked your accountant about the issues raised in my first post?
     
  16. roadworthy

    roadworthy Member

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    We don't have an accountant - we have always done our own tax returns. Sounds unanimous that we now need one though so I will investigate...
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This is a how long is a piece of string type question - it depends.

    A SMSF would be worth considering.
     
  18. Dean Collins

    Dean Collins Well-Known Member

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    thanks.....please post more, interested in something similar
     
  19. larrylarry

    larrylarry Well-Known Member

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    Interesting for me too. I was looking at vacant farm land or land that has dwelling entitlements. We were driving from Cooma back to Sydney... Love the view. Did you need to do up the property?
     
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