Tax Measures for Primary Producers

Posted 25 Mar

There are a range of tax measures that are available to primary producers to help minimise tax obligations. Now is the time to review your financial estimate for the 2021 financial year. WDF can assist you with your tax planning and make recommendations on how to implement the appropriate strategies to minimise your tax obligations.   

The tax measures available to primary producers include:

• Immediate deduction for the cost of new fencing
• Immediate deduction for the cost of 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:
  • Be an individual (including a partner in a partnership or beneficiary of a trust) (Companies and other entities are not eligible for a FMD)
  • Non-primary production income must be less than $100,000
  • Maximum of $800,000 in FMD’s;
  • FMD must be held for 12 months. 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. There are additional eligibility requirements, further information can be access here
• 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

Accelerated depreciation measures are also available and apply to all small businesses. This allows the immediate write-off of assets costing less than the instant asset write-off threshold and the write-off of the small business depreciation pool balance when the closing balance falls below the threshold. The instant asset write-off threshold for 2021 and 2022 is as follows:

• $150,000 for assets acquired from 12/03/2020 to 06/10/2020
• unlimited for assets acquired from 07/10/2020 to 30/06/2022

The applicable threshold is based on the date when assets have been bought and used, or installed ready for use.

The immediate deduction for a car cannot exceed the cost limit as determined by the ATO ($59,136 for 2021). If your vehicle is not considered a passenger vehicle, the car limit does not apply.

The consequence of the accelerated depreciation measures is that small business taxpayers may have reduced depreciation claims and potential profits on sale of plant and equipment in the future and this may impact your future tax liabilities.

Contributing to superannuation or a SMSF is another important and popular tax planning strategy.

Please get in touch with your WDF Professional contact or call our office if you would like to discuss tax planning initiatives before the end of the financial year.