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Farm Tax Measures

By Gillian Hayward

Are you a primary producer? Are you aware of the tax measures available to you?

There are a range of tax measures that are available to primary producers including accelerated depreciation, Farm Management Deposit’s, forced disposal of livestock profit distribution and income averaging to help minimise your tax obligations.

These measures include:

  • Immediate deduction for the cost of new fencing and water facilities such as dams, tanks, bores, irrigations channels, pumps and windmills
  • Immediate deduction for new fodder storage assets purchased on or after 19th August 2018 for example silos, hay sheds, grain storage sheds and above ground bunkers
  • Farm Management Deposits Scheme (FMDs) - The ability to set aside pre-tax income from primary production in years of high income to be drawn upon in future years. To be eligible you must meet the following criteria:               
    • Non-primary production income must be less than $100,000
    • A primary producer may hold up to a maximum of $800,000 in FMD’s
    • A primary producer may have a number of FMD accounts with multiple authorised FMD institutions
    • To retain the tax benefit a FMD must be held for 12 months (there are exceptions to this – see below)
    • Note that while primary production property is experiencing severe drought, you can access your FMDs within 12 months of making those deposits, without having to cancel your tax deduction. However, the deposit will need to be included as assessable income in the year you withdraw it
      • To be eligible, you must hold an FMD and meet all the following requirements. You must:
        • have made a deposit in the previous income year
        • have held the deposit for at least six months
        • be able to demonstrate an area of your primary production property has been affected by rainfall for that six-month period within the lowest 5% of recorded rainfall for the property. You can determine if your primary production property meets the rainfall test at any particular time by using the FMD rainfall analyser on the Bureau of Meteorology website  http://www.bom.gov.au/climate/ada/fmd.shtml
        • not be involved solely in primary production industries like fishing, pearling, tree felling or tree transporting
    • A reminder: you may offset an FMD against a loan related to your primary production business (as long as the loan has no private portion). The majority of the major lenders are now offering the FMD offset to their clients. Please contact us prior to making arrangements with your lender, if you are considering entering an offset arrangement.
  • Elect to spread profit from the Forced disposal (or death) of livestock over a five-year period
  • Averaging of income tax to enable farmers to even out their high and low-income years and in turn the amount of the tax payable over five years

We will be in contact with our clients when completing their tax planning to discuss and implement the appropriate strategies to minimise their tax obligations. If you are not a client of WDF Professional, please contact us to discuss these measures further and how we can help minimise your tax obligations.

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