June 30, 2023 is still 14 months away, but it's starting to feel too close for comfort for farmers trying to beat the curtain descending on the federal government's popular tax deductible investment depreciation incentives.
Huge demand for everything from tractors to new woolsheds and yards has collided with supply shortages and shipping delays to push out delivery and construction timelines for some big ticket investments to early 2023, or well beyond.
Accountants and farm equipment suppliers are warning farmers to largely forget about attempting any last minute rush to buy gear in time to cash in on the current financial year's tax deduction options.
Instead, they should plan now for the sunset date for "temporary full expensing" on June 30 next year.
"To claim the instant asset write-off a purchase must be installed and ready to use by the end of the financial year," said NSW-Victorian border district accountant, Gerard O'Brien.
"But considering current waiting lists are up to six, 10 or 12 months long for some asset purchases it could get tricky if you delay a buying decision too long."
Depreciation
Businesses with turnover of up to $50 million can claim full depreciation on any capital equipment purchase rather than making the usual 15 per cent annual tax time write-downs which applied prior to the emergency measures introduced as an economic stimulus after 2020's COVID-19 outbreak.
That full expensing deal superseded earlier instant asset depreciation offers for small businesses, initially covering capital equipment purchases of up to $1000 then gradually raised to assets worth up to $150,000.
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National Farmers Federation chief executive officer, Tony Mahar, described the 2015 introduction of the small business instant asset write-off as "a stroke of genius" for agriculture, but the NFF is now furious the government may abandon such investment incentives altogether.
Mr O'Brien, with accountancy group RSM Australia in Albury, said clients who had already seen the writing on the wall were getting in early to order cotton pickers or make down payments on $300,000 sheds, well aware their purchases may take until late next summer to arrive or be built.
With a trillion dollar national deficit, it's generally considered highly unlikely the federal government will extend the full asset depreciation write-off again
- Gerard O'Brien, RMS Australia
In WA the Farm Machinery and Industry Association's John Henchy has warned delays could stretch even further, with some farmers now being quoted for deliveries arriving in 2024 - well beyond the 2022-23 tax year.
"We can't be sure, but with a trillion dollar national deficit, it's generally considered highly unlikely the federal government will extend the full asset depreciation write-off again, regardless of who wins this month's election," Mr O'Brien said.
"Unless there's some catastrophic global economic setback emerging from the Ukraine war or something similar in the next 12 months, treasury will be keen to get its revenue collection program back on track."
NFF blindsided
However, NFF is still campaigning hard to keep at least some full depreciation arrangements, arguing the industry was "blindsided" last week when Finance Minister Simon Birmingham conceded instant asset write-offs may not have a place in a Coalition Government after June 2023.
"These measures help provide the means and incentive for farmers to invest in the plant they need to gain efficiencies and improve productivity," Mr Mahar said.
"They help farmers to be more resilient, sustainable and to make their workspaces safer and less labour orientated."
He said assets like tanks and solar water pumps enabled farms better prepare for the next drought, while technology investments such as better wifi promoted digital adoption in the bush.
There is a very real possibility small businesses ordering equipment or other assets in the near future won't receive them before the instant asset write-off expires
- Alexi Boyd, Council of Small Business Organisations of Australia
The Council of Small Business Organisations of Australia argued, at very least, the next federal government should recognise enterprises were "in the midst of an international supply chain crisis" and extend the eligible investment timeline.
"There is a very real possibility small business owners who order equipment or other assets in the near future won't receive them before the instant asset write-off expires," said chief executive officer, Alexi Boyd.
Those views are wholeheartedly shared by director of rural building company, State Wide Sheds, Richard Watkins.
His operations in NSW and Queensland have struggled to work through steel shortages, wet weather setbacks, recent COVID-19 travel restrictions, a chronic skilled tradies' shortage and big demand from farmers and others cashed up and keen to invest in new infrastructure after two good cropping seasons.
Steel shortage
A structural steel shortage alone, caused partly by a halving in production at South Australia's Whyalla steelworks and fresh demand for the inland railway, had also sent costs soaring 70pc in a year.
Although State Wide had even reduced the range of jobs it now accepted in an effort to streamline its workload, any new orders being booked could not start this year.
"I think the government should seriously consider extending its asset write-off deal until 2024," Mr Watkins said.
"There just isn't enough steel or skilled people for us to work any faster to help our customers meet the tax deadline."
Corporate tax partner with BDO's food and agribusiness team, Andrew Jones, said despite the instant depreciation write-offs triggering stronger machinery sales in recent years, farmers and processors had mostly been reluctant to bring forward big spending initiatives, until now, which was subsequently compounding current pressures on suppliers.
Still some options
He felt there was still room for smaller scale instant asset write-offs because it was now a permanent feature of the tax law for business entities with less than $10m annual turnover.
He would, however, be surprised if any government kept the gates wide open, especially for bigger businesses.
Asked whether he supported continuing an instant tax depreciation option on new assets, former rural accountant and Deputy Prime Minister, Barnaby Joyce, said he did, and he believed the initiative worked extremely well in recent years.
However, the topic would have to be left to the future expenditure review committee decisions of a future government.
"It is a discussion to them."
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