Income tax: are bees kept for use in a honey production business trading stock as defined in section 70-10 of the Income Tax Assessment Act 1997?

Yes, bees kept for use in a honey production business are trading stock as defined in section 70-10 of the Income Tax Assessment Act 1997 (ITAA 1997) [1] because they are livestock.

When the final Determination is issued, it is proposed to apply both before and after its date of issue. However, the Determination will not apply to taxpayers to the extent that it conflicts with the terms of settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10).

Section 70-10 states that trading stock includes: (a) anything produced, manufactured or acquired that is held for purposes of manufacture, sale or exchange in the ordinary course of a business; and (b) live stock.

The use of the word 'includes' in the definition of trading stock in section 70-10 signifies that a thing may be trading stock for the purposes of the provision if it is trading stock within the ordinary meaning of that term or it meets the requirements in paragraphs 70-10(a) or 70-10(b). [2]

The term 'live stock' is defined in subsection 995-1(1) of the ITAA 1997 to ' not include animals used as beasts of burden or working beasts in a business other than a primary production business'. The High Court in Federal Commissioner of Taxation v. Wade (1951) 84 CLR 105; (1951) 9 ATD 337 considered this definition of 'livestock' when it was then found in subsection 6(1) of the Income Tax Assessment Act 1936 . Dixon and Fullagar JJ stated that the definition, by inference, makes it clear that all animals used in a primary production business are included as live stock. [3]

Bees, being insects, are animals. [4] Paragraph (b) of the definition of 'primary production business' in subsection 995-1(1) includes as a primary production business a business of 'maintaining animals for the purpose of selling them or their bodily produce (including natural increase)'. Honey is the bodily produce of bees. [5] A business of keeping bees for the production and sale of honey is a 'primary production business' as defined in subsection 995-1(1) and the bees kept for use in that honey production business are livestock.

As bees kept for use in a honey production business are livestock, they are trading stock as defined in section 70-10. [6]

We invite you to comment on this draft Taxation Determination. Please forward your comments to the contact officer by the due date. (Note: the Tax Office prepares a compendium of comments for the consideration of the relevant Rulings Panel or relevant Tax officers. The Tax Office may use a version (names and identifying information removed) of the compendium in providing responses to persons providing comments. Please advise if you do not want your comments included in the latter version of the compendium.) Due date: 1 June 2007 Contact officer details have been removed following publication of the final ruling.