GST issues registers

Primary production industry partnership

16 Farming

16.1 Carrying on

16.1.1 - Related entities conducting a farming business

Question

Is a land owner who allows a related entity to conduct a farm business on the land carrying on an enterprise for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

This issue has been removed. Please refer to issues 13.2.1 and 13.2.2.

16.1.2 - Agistment

Question

Is the provision of agistment a farming business?

For the source of the ATO view refer to:

•

TR 97/11 - Income tax: am I carrying on a business of primary production?

•

MT 2006/1 - The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian Business Number.

Answer

No, the provision of agistment is not a farming business as defined by Section 195 -1 and subsection 38-475(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). It may however, constitute an enterprise for the purposes of section 9-20 of the GST Act.

Explanation

Section 195 -1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a farming business has the meaning given by subsection 38-475(2).

Subsection 38-475(2) of the GST Act provides the following:

'An entity carries on a farming business if it carries on a business of:

1.

cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things), in any physical environment; or

2.

maintaining animals for the purpose of selling them or their bodily produce (including natural increase); or

3.

manufacturing dairy produce from raw material that the entity produced; or

4.

planting or tending trees in a plantation or forest that are intended to be felled.'

An accepted definition of agistment is provided in 2 Halsbury's Laws (4th ed.) paragraph 214, as:

'A contract of Agistment arises where one man, the agistor, takes another man's cattle, horses or other animals to graze on his land for reward, usually at a certain rate per week, on the implied term that he will redeliver them to the owner on demand.'

The ordinary usage of the term now extends to the provision of services such as grooming and veterinary care in addition to the grazing.

A common agistment arrangement is the granting, for reward, of the right to pasture animals, with or without shelter, on another's property. Where agistment is the main or only service provided, this will not constitute a farming business as defined in section 195 of the GST Act. Therefore, the provisions of subdivision 38-O of the GST Act which rely on the existence of a farming business will not apply to a business involving only agistment.

However, the provision of agistment may constitute the carrying on of an enterprise, as defined by section 9-20 of the GST Act. Further information on what constitutes the carrying on of an enterprise can be found in .

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).