Facts - one of our clients is operating a farm stay business; they have purchased sheep's & lambs so that the guests can play with them and feed them. They offer this as an activity the guests could do.
Could you please advise whether the expense incurred for the purchase of animal is deductible or the cost of purchase needs to be capitalized ?
If they need to be capitalized then what would be the effective life of those live stock ?
Thanks
Hi @DivyDoshi,
Thanks for your patience while we checked what exactly ewe should do! 🐑
How your client treats the sheep and lambs for the farm stay depends on a couple of things.
Is your client’s running a farm as a primary production business breeding sheep and selling them or using them for making wool? If so, they’ll be considered to be part of the primary production business. That means they’ll be treated as trading stock and trading stock rules will apply. In the income year trading stock is purchased a deduction will apply.
If your client has bought the sheep and lambs to be used solely in the farm stay business, they will be working beasts and treated as plant. Therefore, they’ll need to be capitalised and depreciated. Working beasts and beasts of burden used in a business other than primary production have an effective life of 15 years.
Your client might also be able to apply for temporary full expensing, if eligible.
Fleece let us know if you have any other questions!
Hi @DivyDoshi
That sounds so cuuute! We'll ask our technical team to see what they say and we'll let you know.
Hi @DivyDoshi,
Thanks for your patience while we checked what exactly ewe should do! 🐑
How your client treats the sheep and lambs for the farm stay depends on a couple of things.
Is your client’s running a farm as a primary production business breeding sheep and selling them or using them for making wool? If so, they’ll be considered to be part of the primary production business. That means they’ll be treated as trading stock and trading stock rules will apply. In the income year trading stock is purchased a deduction will apply.
If your client has bought the sheep and lambs to be used solely in the farm stay business, they will be working beasts and treated as plant. Therefore, they’ll need to be capitalised and depreciated. Working beasts and beasts of burden used in a business other than primary production have an effective life of 15 years.
Your client might also be able to apply for temporary full expensing, if eligible.
Fleece let us know if you have any other questions!
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