Case D3

Judges:
FE Dubout Ch
G Thompson M
N Dempsey M

Court:
No. 3 Board of Review

Judgment date: 28 January 1972.

---

F.E. Dubout (Chairman): The question for decision in this reference is whether the taxpayer's activities in connection with a country property constituted the carrying on of a business of primary production, so that certain items of expenditure incurred by the taxpayer during the years ended 30 June 1967 and 1968, as well as depreciation and an investment allowance, might be allowed as deductions in those years. Since the taxpayer also claims to be entitled to the application of the averaging provisions, there is also the question as to whether the taxpayer was carrying on a business of primary production in years of income prior to 1967 and 1968.

2. The facts of the case are sufficiently set out in the reasons for decision prepared by my colleague, Mr. Dempsey, which I have had the advantage of reading. I have no need to repeat any of those facts or to add to the recital of them. Along with my colleagues, I am satisfied on the evidence that the taxpayer during the years ended 30 June 1967 and 30 June 1968 was carrying on a business of primary production. Further, I am satisfied that that business had its beginnings in the year of income ended 30 June 1965.

3. In the case of
F.C. of T. v. Martin (1953-54) 90 C.L.R. 470 , Webb J. had to consider whether certain activities carried on by a taxpayer amounted to the carrying on of a business of racing and betting. Although the remarks of his Honour to which I am about to refer were made in the context of racing activities, I think that they are appropriate to any situation where one has to consider whether what is being done by a taxpayer amounts to the carrying on of a business. At p. 474, his Honour said -

``The test is both subjective and objective: it is made by regarding the nature and extent of the activities under review, as well as the purpose of the individual engaging in them, and, as counsel for the taxpayer put it, the determination is eventually based on the large or general impression gained.''

4. On the subjective side, there is the taxpayer's evidence of his purpose and intention in engaging in the farming activities. The taxpayer's own conviction that he was carrying on a business can not, of course, conclude the matter in his favour, but the objective facts are sufficiently strong, in my opinion, for me to conclude that his stated purpose was not inconsistent with reality. I might add that if there is a gradation in cases of this kind in one's readiness to accept that a business is being carried on, I would incline to the view that this is a case lying towards the lower end of the scale. The degree of activity is approaching the minimum upon which a claim to be carrying on a business could be founded.

5. Some reliance was placed by the Commissioner's representative upon the facts that the property was small, its potentially productive area was even smaller, and it could almost certainly never provide the taxpayer with a livelihood. I have not been unmindful of those considerations, but their existence is not fatal to the taxpayer's claim. There is no authority, to my

---

ATC 15

knowledge, which says that an enterprise must be carried on on such a scale as to be capable of providing an adequate means of living before it can qualify as a business.

6. My decision, therefore, is that the taxpayer was carrying on a business of primary production in the years which were the subject of reference, i.e. the years of income ended 30 June 1967 and 30 June 1968. Insofar as the rate of tax has to be ascertained by reference to an average taxable income. I further decide that the business of primary production commenced in the year ended 30 June 1965. The assessments before the Board should be amended to give effect to this decision, with such number of years being brought into the calculation for average purposes as the provisions of Div. 16 of Part III require.