What tax measures are there to assist drought-stricken farmers?
Currently, there is a drought affecting many of Australia’s farmers. We have set out below some of the main tax concessions / measures that may be available for those affected:
- Farm management deposits (FMDs)
A farmer that invests in farm management deposits (FMDs) can only qualify for an upfront deduction up to $800,000 if such a FMD investment is held for longer than a year. However, farmers affected by severe drought conditions will still qualify for this upfront deduction even if they withdraw this deposit within the first 12 months. A further benefit is that such FMD funds can be used as an offset account (to set off against interest on other farming loans). Note however that if such funds in the FMDs are used to offset interest payable on non-primary production loans, an administrative penalty of 200% of the amount by which the interest has been reduced, will apply. However, the Commissioner has a discretion to remit this penalty.
- Accelerated depreciation arrangements & instant asset write-off
Ordinarily, farmers can depreciate the cost of fodder storage assets (e.g. silos and hay sheds used to store grains) over 3 years. However, pursuant to new measures announced recently, the cost of such fodder storage assets installed ready for use from 19 August 2018 will be immediately deductible. Furthermore, farmers with a turnover of less than $10 million will qualify for the instant asset write-off on assets costing less than $20,000.
- Income tax averaging
Farmers may also be able to even out their high and low income years and therefore control the amount of tax payable over a maximum of five years to ensure they do not pay more tax over time than taxpayers on comparable, but steady incomes.
If you are involved in farming and wish to make an early withdrawal from your FMD funds or are interested in exploring possible ways that these incentives may be of value to you, please contact us. Our team at Nexia Australia has considerable farming experience and we are looking forward to assist you further with all your farming business needs.
Proposed luxury car tax (LCT) changes on re-imported cars refurbished overseas
For the current 2019 income tax year, cars with a GST inclusive value of more than $75,526 (for fuel efficient cars) or $66,331 (for other cars) will attract luxury car tax (LCT) at a rate of 33% on the amount above the luxury car threshold on the initial taxable supply or taxable importation of the luxury car.
Currently, cars that have been refurbished (e.g. serviced, repaired or altered) in Australia – and the refurbishment has pushed the GST inclusive value of the car above the luxury car threshold – will not be subject to LCT, provided there was no change of ownership of the car. However, cars exported from Australia to be refurbished overseas (where the refurbishment pushes the GST inclusive value of the car above the luxury car threshold), will be subject to LCT when such cars are eventually re-imported to Australia.
There is currently a proposal to abolish LCT from 1 January 2019 on such cars exported and refurbished overseas and re-imported to Australia as luxury cars, provided there was no change in ownership of the car from the time just before the car was exported to the time when the luxury car was re-imported.
We will keep you informed of any new developments in this area. In the meantime, we would be happy to assist you with any other LCT queries you may have.