Breeding Horses in Australia: Business or Hobby?

When it comes to the breeding of horses, owners may be inclined to claim expenses incurred at tax time. In Australia, this depend on a few things.

To be able to claim costs incurred with regards to breeding horses, it must first be established that the breeding of these horses constitutes a business. The Australian Taxation Office (ATO) may look at a number of different factors. The same can be said for owning and racing horses in Australia.

The Nature of the Business

A business is generally run with the view to provide a product or service to clients and to make a profit. For those in the business of breeding horses, this could be expressed to the ATO in the form of:

the size, scale and permanency of the activity that is being carried out
proof of existence of a property utilised for breeding purposes
proof or regularity of activities being carried out in relation to breeding horses
regular service of mares and utilisation of stallion service fees or breeding rights

Alongside this, the business needs to be carrying out activities that generate a profit. In the form of breeding horses, this is often in the sale of bred stock. The regular sale of stock that has been bred will help to convince the ATO that the activity of breeding horses is indeed a business.

Increasing Stock Numbers

As time progresses, an increase in the number of breeding stock and consequently the progeny produced for sale will also indicate a growing business. Increasing stock numbers without regular sales will not however help in this area. Increasing numbers in horses for breeding should also show an increase in the number of stock that are available for sale and sold on a regular basis, e.g. – annually.

Appropriate Paperwork

For the breeding of horses to be considered a business, there are particular records that need to be proved. Firstly, are proper records being kept and up to date?

Of these, is there proof of a registered business name, a separate business bank account and the use of consultants, such as an accountant? Alongside this, horse breeders should have a valid business plan in place that details how the business plans to make a profit. Each of these factors will help establish a business over a hobby.

The breeding of horses is undertaken by many on a small scale and often represents a hobby. For those wishing to turn their passion for breeding horses into a business, the above factors should be considered and appropriate details recorded and filed in a logical manner.

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