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Edited version of your private ruling
Authorisation Number: 1012431817133
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Ruling
Subject: Forced disposal of livestock
Question
Are you entitled to make an election to spread or defer tax on profit from a forced disposal of livestock?
Answer
No
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You operate a primary production business.
You run livestock on your property.
You have been affected by drought.
You sold part of your property and the majority of your livestock in the 2011-12 financial year.
You now plan to share farm a cropping operation and run a number of livestock which is commensurate with the amount you retained.
With the funds from the sale of livestock you intend to use to support ongoing farming operations in the short term and reduce debt and potentially scale up when the market conditions more favour an export driven industry and local conditions.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 385-100
Reasons for decision
Summary
You are not entitled to make an election to defer or spread your tax on profit from the forced disposal of livestock.
Detailed reasoning
Subdivision 358-E of the Income Tax Assessment Act 1997 (ITAA 1997) discusses how a primary producer can elect to spread or defer tax on profit from forced disposal or death of livestock.
Section 358-100 discusses the conditions to be able to make an election.
Subsection 358-100(1) states you can make an election if:
(a) you dispose of livestock, or they die, because:
(i). land is compulsorily acquired or resumed under an Act; or
(ii). a State or Territory leases land for a cattle tick eradication campaign; or
(iii). pasture or fodder is destroyed by fire, drought or flood and you will use the proceeds of the disposal or death mainly to buy replacement stock or to maintain breeding stock for the purpose of replacing the livestock; or
(iv). they are compulsorily destroyed under an Australian law for the control of a disease or they die of such a disease; or
(v). you receive an official notification under an Australian law dealing with contamination of property; and
(b) you held the livestock as assets of a primary production business you carry on in Australia; and
(c) apart from this Subdivision, your assessable income for any income year would include the proceeds of the disposal or death.
In your case you sold the majority of your livestock.
You now plan to share farm a cropping operation and run approximately the same number of livestock as you retained. With the funds from the sale of the livestock you intend to use to support ongoing farming operations in the short term and reduce debt. You may potentially scale up when the market conditions more favour an export driven industry and local conditions.
You disposed of the vast majority of your livestock as the pasture was destroyed by drought however you have not used the proceeds of the disposal mainly to buy replacement stock or to maintain breeding stock for the purpose of replacing the livestock. You have used the funds to support ongoing farming operations and to pay off debt. Therefore you are not entitled to elect to defer or spread the profit on disposal of your livestock.
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