Definition of a hobby farm

3 posts
Tue, 01/31/2012 - 00:56 #1

Member for

12 years 9 months
Lazarust
Last seen: 01/31/2012 - 01:21
Joined: 01/31/2012 - 00:48

Definition of a hobby farm

Hi there

We are looking to purchase our first farm, have a tree change and get into some breeding of horses, raising chickens etc. we expect to make a small income initially and as we wind down our city jobs over the next five years and increase the income from the farm.

In talking with lenders and insurance companies they all ask whether we are setting up a hobby farm or a farming business. 

Can anyone tell me the technical definition?

Thanks

T

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Tue, 01/31/2012 - 12:37 #2
barb
Last seen: 09/17/2019 - 18:07
Joined: 11/23/2011 - 09:38

Hi T,

It is important to decide whether you are going to set up a company,  a partnership or just run the property as a hobby farm. There are two places that you can get the advice you need, unless someone else on the forum has the answer.   The first is the Taxation Department and the second is your accountant. If you decide to register as a business you will need to talk to one or both of the above anyway, because you will need to sort out with them how you want to do your GST reporting, either quarterly or annually. The telephone number for the ATO business info. hotline is 13 28 66.  Here is a link, that you can copy and paste into your browser, for the ATO answering the question, Am I a Business? http://www.ato.gov.au/content/66884.htm  Hope this is helpful.

regards,

Barb

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Tue, 01/31/2012 - 17:29 #3
charlie
Last seen: 12/26/2018 - 09:21
Joined: 05/31/2011 - 09:44

Hi T,

Welcome to Farmstyle and thanks for the question.

A hobby farm is purely conducted as a recreational pursuit or as a interest with no intention of making money. In contrast a farming business is conducted as just that, a business where you are dedicating enough time and money with the intention of making a profit. If this is the case you will be classed as a primary producer. From an insurance and finance perspective, whether you are carrying out a business or hobby will influence your level of risk/liability and potential insurance premiums and interest rates.

To class your farm as a business you need to be turning over $20,000, anything under this and it is classed as a hobby farm. Once your turnover is above this level you can offset deductions from the business and you must also get an ABN (you don't have to register for GST until you turnover $75,000). If your turnover is above $20,000 and you don't have an ABN a supplier can withhold 46.5% of the sale. 

If you earn more than $40,000 off farm you will not be able to offset any losses from your farm against this income. This ruling can in a few years ago to stop high income earner's from claiming huge losses from small farms.

If you decide to keep your city job and want to run your farm as a hobby farm you will need to fill out a Statement by Supplier before you sell goods. The sale of goods will be then GST exempt.

I hope this information has been of assistance and I hope you keep us updated on your farming progress.

Charlie 

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