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Edited version of private advice
Authorisation Number: 1051657550047
Date of advice: 08 April 2020
Ruling
Subject: Integrated business activities relating to breeding, racing and selling horses
Question
Are your horse related breeding, racing and selling activities, considered to be one integrated business activity under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer
Yes. We consider that your activities amount to the carrying on of a business. Your business activities are considered integrated and not stand alone as these activities are found to be inherently connected with the furtherance of your business.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You have been breeding, racing and selling horses for a period exceeding X years.
You originally bred a pacing horse. This led to successful racing and a build-up of reputation.
The progeny bred from these horses were then trained or sold if they did not meet with pacing requirements.
You breed on average Y horses per year. These horses are sold at a price ranging from $,$$$ and $$,$$$.
In 20XX, two mares failed to conceive and a third died. As the equine gestation period is 11 months, this reduced the sales in the 20XX income year.
In the 20XX income year only Z horses were sold, reducing the annual income from sales to $,$$$.
You believe the mares failed to conceive due to the drought severely impacting the nutrition available for the brood mares to conceive and carry the foals to term.
The drought is also believed to have contributed to the death of the third mare.
Income from racing activities exceeded $$$,$$$ in the 20XX income year.
Your activities have been producing a profit from business in previous years and is not subject to Division 35 as the business turnover test has been met under section 35-10(3) of the ITAA 1997.
The business has reported profits from livestock sales in the past 5 years.
In four of the last five years (including 20XX) you have produced an overall net profit from all activities.
In 20XX you expect an overall taxable income is $$$,$$$ which includes a profit from the non-primary production activities and a loss of from primary production activities.
In the years 20XX to 20XX inclusive, you have had consistent income per year.
You prepare and lodge a BAS each quarter which is the result of the preparation of a fully reconciled electronic cashbook including bank reconciliations for all accounts used in his business.
Relevant legislative provisions
Income Tax Assessment Act 1997 subsection 35-10(3)
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 subsection 995-1(1)