Tax Rules on Farmers and Farm Businesses
There are lots of tax rules you should know about if you're a farmer, some of them specific to primary producers. H&R Block can help you work out which ones apply to you. Here's a summary of the key points for primary producers:
- Company tax rate for most businesses with a turnover up to $50 million is now 27.5%.
- Instant write off for cost of capital assets costing less than $30,000 for businesses with turnover of less than $50m from 2 April 2019 until 30 June 2020 (lower thresholds apply for assets acquired before 2 April 2019 and the instant write-off is only available for businesses with a turnover of less than $10m up to that date).
- Instant write-off on fencing and water facilities, such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills.
- Immediate deduction for capital expenditure on fodder storage assets such as silos and tanks used to store grain and other animal feed.
- Change business structure without capital gains tax, e.g. partnership to company.
- Income averaging. Primary producers can even out income across years so their tax liability is more aligned with taxpayers on a stable income.
- Immediate deductions for landcare operations, such as drainage work to prevent salinity, erosion control activities or erecting fences.
- Ten-year write-off for electricity connections and telephone lines.
- Deferral of profit on the forced disposal or death of livestock, for example sale due to drought, fire or flood.
- Accelerated deduction for horticultural plants, including immediate deductibility for plants with an effective life of less than three years (including some grapevines).
- Spread tax on assessable insurance recoveries in equal instalments over five years.
- If you are hit by fire, flood or drought, and need to undertake an early sheep shearing and therefore sell two wool clips in one income year, you can elect to defer the profit on sale of the second clip to the following year.
- Farm Management Deposits (FMD) allow primary producers to carry over income from years of good cash flow and draw down on that income in years when they need cash, deferring income tax on primary production income from the income year in which the deposit is made until the income year in which the deposit is repaid. The scheme is now more generous, with an increased non-primary production income threshold of $100,000.
FMDs can also now be used to offset interest costs on primary production business debt. Also drought affected producers can withdraw their FMD within 12 months without losing tax benefits (conditions apply).
- Selling the farm. Reduce capital gains tax liabilities on sale by taking advantage of the small business CGT concessions. You might also qualify for an exemption on the part of the farm which is your home.
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