In February, the Federal Court decided there was no primary production business being carried on despite 14 separate farming activities being planned for a 500 acre property west of Brisbane. The Court was considering an appeal in Nelson after an earlier 2012 decision by the Tribunal to deny farm based deductions claimed for the 2004 to 2009 income years. The Court and the Tribunal relied on factors set out in Taxation Ruling 97/11 and recognised that the indicia of carrying on a business set out in the Ruling as correct at law.The indicia of carrying on a business set out in the Ruling are:

• Having a significant commercial purpose and character;
• More than just an intention to engage in business;
• Purpose of making a profit as well as a prospect of profit from the activity;
• Repetition and regularity;
• Carried out in a similar manner to that in the ordinary trade in that line of business;
• Planned, organised and carried on in a business-like manner such that it is directed at making a profit;
• Size, scale and permanency; and
• Whether the activity is better described as a hobby, a form of recreation or a sporting activity.

The Court noted that Mr Nelson (in his role as trustee) had advanced plans for 14 separate farming activities but had not produced any income from those activities in the 2004 to 2009 income years: aquaculture, cropping, free-range pigs, growing timber for fencing, growing timber for milling, storing and breeding cattle, conducting a nursery and selling seedlings and plants for coal ovation, producing seedlings and plants for sale, growing an orchid, poultry, building cabins for a accommodation on the property, manufacturing relocatable cabins, meet processing and producing stock feed.It was found that Mr Nelson had not engaged in business because none of the planned activities had advanced much beyond the planning stage and his operation had not reached the point where it could properly be described as a business despite the Tribunal noting that:

• He was an honest, enterprising and hard-working man;
• He had lots of good ideas about how to make his farm turn a profit;
• Potential business activities were carefully researched;
• He had prepared extensive business plans;
• He kept meticulous books and records;
• He had a well-stocked library of research material;
• There was evidence of a systematic approach;
• He has acquired a good deal of machinery;
• The operation is small, but not necessarily unsustainable;
• He was genuinely committed to making a profit from the farming operation in due course;
• The Tribunal accepted that Mr Nelson did not see the property as a mere hobby or lifestyle;
• He had cleared parts of the property and laid down or improved vehicular access roads;
• He has built fences out of harvested timber;
• He has planted trees to test orchids;
• He has established farm out buildings, including a hen house and nursery;
• He has installed irrigation pipes;
• He has a large machinery shed; and
• All of those things are consistent with the operation being characterised as a business.

Nonetheless, the Court and Tribunal found that none of the farm activities had advanced much beyond the planning stage.Nelson v Commissioner of Taxation [2014] FCA 57; Geoffrey Nelson v Commissioner of Taxation [2012] AATA 579; TR 97/11Andrew and Tony Lovett1 April 2014