Bush accountants and farm equipment suppliers are applauding another federal budget increase to the amount farmers can spend on new assets to qualify for instant tax rebates, saying the flow-on benefits may be life saving for firms in struggling regional economies.
Longer term plans to streamline the tax rate scale were also a bonus for individual workers, and fast tracked corporate tax rate cuts for companies with less than $50 million annual turnover have been praised, too, as they drop from 27.5 per cent to 26pc next year, then 25pc in 2021-22.
The corporate tax cuts are five years earlier than previously planned and set to help about 970,000 small businesses nationally.
The new farm asset depreciation tax write-off applies to purchases worth up to $30,000 made from April 2 (until June 30, 2020).
Until now the purchase had to be worth less than $20,000.
Extending the spending amount allowed for an asset write-off will certainly help farmers, but importantly it also means a lot to regional motorbike and machinery dealers
- Scott Christian, Boyce Chartered Accountants
The write-off now also extends to small businesses with a turnover of up to $50m (previously $10m).
That's well above average farm turnover, but likely to include spending by many regional agribusinesses such as grain traders, fuel and fertiliser suppliers and others providing farm input services.
"Extending the spending amount allowed for an asset write-off will certainly help farmers, but importantly it also means a lot to regional motorbike and machinery dealers who are likely to benefit from a broad range of extra business it generates," said Dubbo based director with Boyce Chartered Accountants, Scott Christian.
Any asset purchase used entirely by the farm business, from wool presses to cattle crushes or second hand farm vehicles, qualifies for the tax rebate.
He noted, however, the write-off benefit did not deliver a full refund on the cost of new gear - a point farmers sometimes misunderstood.
Based on farm earnings taxed at the 37pc marginal company tax rate, a business' cash saving on a $30,000 (GST exclusive) equipment purchase represented an $11,100 reduction in the farm's tax bill.
RSM Australia director at Albury, and Burrumbuttock mixed livestock and grain producer, Gerard O'Brien, agreed drought-stressed regional economies should benefit from any tax-effective budget stimulus.
However, drought also meant the promised business tax cuts were unlikely to register as a significant win with many eastern states farmers in the next two trading years, given they were not expecting to have much income to be taxed.
We would have liked to see tax measures further aligned with the inherent risk of drought and flood
- Murray Fong, RSM Australia
RSM's business advisory principal, Murray Fong, said given drought posed significant risks to farming in Australia, the federal budget allocation for a future drought and disaster funds ensured money was being allocated for projects dedicated to preparing for, managing, and recovering from bad seasons.
"However, we would have liked to see tax measures further aligned with the inherent risk of drought and flood," he said.
Drought tax risk
"With about $6 billion held in farm management deposits, farmers now risk paying a significant taxes when withdrawing funds in drought or flood affected years as business losses in many cases are unable to be offset against the personal income of an FMD withdrawal."
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Extending access to the farm household allowance by allowing destocking producers to retain access to income support was a positive budget measure, but it was also "fraught with complexity" as funds had to be contributed to a complying farm management deposit.
"This creates difficulty in managing taxes on withdrawals and is unlikely to be far reaching in its application," he said.
National Australia Bank's agribusiness customer executive, Neil Findlay, also supported the government's "positive steps towards a more proactive response to natural disaster relief".
Boyce's Mr Christian, whose client base spans a wide area of western NSW, said there was a clear recognition of the seasonal hardship faced by farmers and rural communities.
He hoped the extent of this hardship and need for assistance continued to get the government attention it required.
Mr Christian noted in most cases, apart from the reductions to personal tax rates and an instant asset write off increases for business, the budget's promised simplified tax rate structure and superannuation changes would not kick in for at least two years - and would have to survive at least two federal elections between now and 2025.
Budget lite
"If we knew there was going to be continuity in government between now and then the budget would be a lot more convincing, but in reality it feels a bit light to me," he said.
"There is, however, a marked increase in infrastructure spending in regional areas which is certainly welcome - particularly if you are in Queensland and Victoria."
Despite the long wait until 2024-25, RSM's Mr O'Brien welcomed the promise of a flatter tax rate structure which would remove the 37pc tax rate threshold and see taxpayers earning between $45,000 and $200,000 a year all paying 30pc of their income in tax.
The two other tax categories will be 19pc for low income earners and 45pc once personal income exceeds $200,000 a year.
"That is a major structural reform which most people will really support."
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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).
