Commentary

B5.104 Share farming and contract farming

Business tax
Business tax | Commentary

B5.104 Share farming and contract farming

Business tax | Commentary

B5.104 Share farming and contract farming

An owner of farm land may wish to enter into share farming or contract farming arrangements, rather than simply letting the land. For tax purposes, the landowner is treated as farming the land1 where such arrangements are carefully drawn, rather than assessable under the property income rules2.

Contract farming

The term 'contract farming' may refer to several different types of farming arrangements. In this Division, the term is used to refer to an arrangement entered into between the landowner and another party whereby the other party acts as an agent for the landowner; it is an arrangement distinct from share farming (see below). The contractor normally manages the day to day farming activities for a fee, agreed in advance, which may include a bonus based on profits for a given period. Under such an arrangement the landowner normally decides the overall farming policy.

A badly drafted contract farming agreement may create a tenancy or a partnership even though the landowner intended neither. A partnership can be created without any

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