ATO Interpretative Decision

ATO ID 2002/97

Income Tax

Share farming expenses
FOI status: may be released

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If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is a deduction available to a taxpayer who is not the property owner under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for a half share of share farming expenses?

Decision

No. A deduction is not available under section 8-1 of the ITAA 1997 for a half share of share farming expenses as the taxpayer never incurs the expenses.

Facts

The taxpayer is a share farmer. All share farming income is placed in a separate bank account in the property owners' name. All share farming expenses are incurred in the property owners' name and are paid for by the property owner from this bank account each month. The share farmer has no access to this bank account.

Under the share farming agreement, the share farmer receives a payment equal to 50% of the share farming income after the deduction of farm expenses.

Reasons for Decision

Section 8-1 of the ITAA 1997 states that a deduction is allowable for all losses or outgoings to the extent that they are incurred in gaining assessable income.

In this case, the taxpayer never incurs the farm expenses. These expenses are incurred solely by the property owner, who pays for them from a separate bank account. As the taxpayer does not incur the share farming expenses a deduction for these expenses is not available under section 8-1 of the ITAA 1997.

Date of decision: 17 December 2001

Year of income: Year ended 30 June 2001

Legislative References:
Income Tax Assessment Act 1997
section 8-1

Keywords
Deductions & expenses
Primary production

Siebel/TDMS Reference Number: DW269838; 1-5THN3LA; 1-B8G6B00

Business Line: Private Groups and High Wealth Individuals

Date of publication: 30 January 2002
Date reviewed: 11 April 2017

ISSN: 1445-2782

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