News
Agribusiness paper 'evolutionary'
Thu, 06 Aug 2015 13:13:00
“Stronger Farmers, Stronger Economy”, the federal government’s long anticipated white paper on Agribusiness, will be welcomed by the bush, says David Walker, Principal, Crowe Horwath.
At the individual agribusiness enterprise level, the key focus for most is likely to be the planned changes to tax arrangements that supplement those already announced in the May Budget, particularly those relating to Farm Management Deposits says Mr Walker.
“The agribusiness white paper is the result of extensive consultation with the sector, with more than 1000 submissions received.”
“It contains previously announced measures relating to the $20,000 small business write-off and is an evolutionary rather than a revolutionary document, insofar a tax is concerned.”
“Three of the five main new taxation related initiatives concern enhancements to Farm Management Deposits (FMDs) which can be a very useful financial management tool.”
FMDs involve placing funds, usually earned in a good year, on deposits in a special FMD bank account to act as a buffer for any lean years down the track.
“The tax advantage is derived because those monies are not taxable in the year they are earned, but rather, are taxed when they are drawn down, which is usually in a year of low or negative income, when the top marginal tax rate is not incurred.”
“On top of the taxation advantage there is the benefit of peace of mind associated with this government sponsored prudence.”
“The other two measures involve changes to the income tax averaging regime and new ATO assistance for drought-affected communities.”
The specific changes to the FMD regime involve a doubling of the amount of funds able to be invested in an FMD from $400,000 to $800,000.
“As well, early access provisions will be introduced for FMDs in times of drought, without affecting tax concessions.”
And, finally, current restrictions on financial institutions which prevent FMD accounts being used as a loan offset will be removed.
“These three reforms make an already attractive financial and risk management tool even more appealing for primary producers.”
The other major tax concessions announced are:
• Primary producers will be able to opt back into the income tax averaging regime 10 years after they have elected to exit the scheme
• Taxpayers in drought-affected communities will be able to discuss extended payment or lodgement arrangements and interest-free payment plans with the ATO, who will proactively contact taxpayers in those areas with offers of support
“In our view, these are the five new taxation changes that will be noticed almost immediately by the sector and it’s difficult to imagine anything but universal support for them.”
“As one of the largest providers of financial services to the agribusiness sector both in Australia and New Zealand, Crowe Horwath has a special relation with the sector based on the breadth of our reach in the bush and our depth of experience,” Mr. Walker said.