What do farm family four-wheel-drives have in common with lower corporate taxes and farm management deposits?
Answer: They are just a small sample of a big range of hot button issues on the farm sector’s taxation reform hit list.
While rural economists and farm leaders have been championing the need for major efficiency changes to the tax system for years, the industry is turning up the heat on Canberra to get some common sense improvements to our clunky, complex and often-stifling tax system.
In reality the current, chaotic and precariously balanced federal parliamentary environment does not offer much hope for a major tax revamp.
Don’t expect much politically unpalatable talk about widening or lifting the goods and services tax (GST), revamping fuel and transport revenue structures, or abolishing state payroll taxes – regardless of how efficient such changes may be.
However, ag industry representative groups have worked for at least a year to get some practical changes on the agenda before May’s federal budget.
The National Farmers Federation (NFF) says Australia’s tax system is in “desperate need of reform” to help farm businesses and rural communities operate to their potential, particularly as big ag export opportunities open up.
Late last year a jointly-funded industry report “Tax in Agriculture” delivered a 120-page summary of key considerations.
They included ditching capital gains tax (CGT) costs imposed when farmers roll their enterprise into next generation ownership, cutting company tax rates from 30 per cent to 22pc, and re-thinking the luxury car tax on vehicle imports because it discriminates against families in remote areas who need robust (but pricey) 4WD sedans to negotiate country roads.
High on the list is broadening the risk managing benefits of farm management deposits (FMD), including extending new interest offset arrangements so farmers can pay down debts with interest generated in FMD accounts.
“FMD’s have been a real success story in helping farmers plan ahead for fluctuating seasons, markets and incomes, but despite last year’s improvements, more farmers need access to FMDs as a debt offset tool,” said GrainGrowers policy manager, David McKeon.
“The offset intention is 100pc right, but it only lets individual farmers link FMD accounts to their borrowings – not trusts or companies.
“Most farm debt is held at a business level, not by individuals, and more farm enterprises are moving to company structures.
“Farm business management has evolved a lot in 20 years and the tax system needs to catch up.”
Australia’s high company tax rates were a costly legacy of changed business conditions.
Although the federal opposition has actively tried discrediting the idea, the Coalition government wants taxes cut gradually to 25pc over 10 years – if it can win enough crossbench support.
The NFF suggests even lower company taxes (22pc or less) are needed if the new Trump administration in the US adopts plans to cut rates to below 20pc and the UK makes similar moves to promote more business investment activity.
While corporate taxes were not directly relevant to all farmers, NFF executive director, Tony Mahar, said lower company taxes would help the whole farm supply chain’s competitiveness, encouraging input and service suppliers, food processors and logistics firms to invest here, or maintain current operations rather than focusing offshore.
“We need to recognise what’s happening globally,” Mr Mahar said.
“If we’re not competitive because of a whole range of tax issues, including company taxes, there’ll be implications for agricultural businesses across the board and regional economies.”
He noted New Zealand’s company tax rate was already down to 28pc and personal income taxes ranged from 10pc to 33pc, while Australians paid up to 47pc, plus the Medicare levy.
“It’s clear from a wide body of research our corporate tax rate is high on the international scale and an impediment to business development here,” said co-author of the Tax in Australia report, Jono Forrest at Boyce Accountants in Cooma.
As corporate agribusinesses also played greater roles in farm production, the report urged re-thinking transfer price reporting rules for foreign-owned businesses selling locally grown products like grain, cotton or meat, to offshore parent companies.
“We certainly want to maintain the integrity of transfer price reporting systems, but it needs to be simpler and more practical for the taxpayer,” Mr Forrest said.
He also noted farm business CGT concession thresholds (net assets must be under $6m and annual turnover below $2m) had not changed since the 1990s and needed to reflect inflation.
The rationale for a 33pc luxury tax on 4WDs costing more than $63,184 was also outdated, partly because Australia would soon have no local car making industry to protect from luxury imports – the original reason for the tax.
“We’re so not concerned about business vehicles and 4WD utes (not caught by the tax), but it’s unfair families living in western NSW or North Queensland must pay a luxury tax to buy what is today’s equivalent of the 1970s Ford Falcon station wagon.”
GrainGrowers’ Mr McKeon noted Toyota 4WD buyers in Australia paid more luxury taxes than buyers of BMW or Mercedes-Benz cars, including farmers stung for buying a Toyota LandCruiser or Prado, or a Nissan Patrol.
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
