Who has a primary residence they use as a hobby farm (tax deductions)

Discussion in 'Accounting & Tax' started by TUF250, 9th Sep, 2018.

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  1. TUF250

    TUF250 Member

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    Hi everyone.

    We are looking at buying a large property in northern Vic. The plan is for acreage that will include our primary residence and we will raise some livestock there. The plan will be to run this as a small farm. Not aiming for any substantial profits but just making the most of the land that we will have.

    No I am planning on getting tax advise obviously but I wanted to hear from those with similar set ups and what tax concessions benefits that you were able to take advantage of (my income makes this attractive) Such as can you claim losses from the 'Business' against income? Could this stretch to mortgage payments or other expenses. As I said I will be seeking tax advice but was keen to hear on others overall experiences with this kind of move.

    Thanks
     
  2. Redwing

    Redwing Well-Known Member

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    I suppose it depends if run as a business or a hobby - how much do you anticipate making each year from the farm as income?
     
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  3. Ross Forrester

    Ross Forrester Well-Known Member Business Member

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    One option...

    A deed of partition so you own the main residence. Farm land is owned by your smsf that rents the farm to the farming business.

    I have another 32 options...
     
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  4. Redwing

    Redwing Well-Known Member

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    I know of someone who's SMSF owns the land that is used for agistment of a variety of horses (10-13) the house on the property that is used for agistment is not included though
     
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  5. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    A Hobby farm may not satisfy the real business property requirements.

    Personal tax advice is needed. eg CGT main residence exemption covers 2HA max. Non-commercial loss information, state land tax PP concessions etc.
     
  6. TUF250

    TUF250 Member

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    It wouldn't be a lot of income and as I said it wasn't thea reason for doing it but I read that you can offset the losses against your income if total income is less than 250k pa so I was thinking that if you could satisfy the real business requirements which I feel that we may be able to, that you might be able to claim depreciation on machines, utility vehicle etc?
     
  7. Blueskies

    Blueskies Well-Known Member

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    There is an ATO ruling about this, worth a read:

    https://www.ato.gov.au/law/view/document?DocID=TXR/TR9711/NAT/ATO/00001#P12

    In a nutshell it says that there has to be evidence that there is a '''significant commercial character" to what you are doing. I think if you are talking about making a couple of grand each year selling a flock of sheep and then claiming deductions for your mortgage/utilities/fences/quad-bikes etc you would be on shaky ground.

    If you have a business plan, registered ABN, making regular capital investments, turning over significant amounts per year etc then it would look a lot more like a real business.
     
  8. TUF250

    TUF250 Member

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    Thank you for the replies. I willam obviously have to do more research but it looks like there is some potential there at the very least. Thank you for the replies so far, I really apprecsite the insight.
     
  9. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    An ABN is not an essential character for a business. A small business may or may not have a ABN eg a winery or olive grower just planting vines / trees. Worth also looking at the Vic land tax rules for primary production. And the non-commercial loss tests.

    The important element that the ATO mention is :
    You are not operating a business if the activity is better described as a hobby, a form of recreation or a sporting activity.
    You used the word hobby farm...

    If you plan to offset PP losses v's ordinary earnings its worth seeking a private ruling. You would be arguing that your lifestyle is being funded by the PP income but then have non-PP income which assists to fund the lifestyle which is contradictory.