Earlier this month, Scott Morrison delivered his first Budget as Federal Treasurer. Coming just weeks before a Federal Election, the Treasurer was keen to demonstrate his fiscal conservatism, and as such, this year’s Budget didn’t provide much targeted support to the primary production sector. However, the widening of the $2 million Small Business Entity test to those with a turnover of less than $10 million will provide many with the benefits of immediate write-offs and increased depreciation of plant and equipment purchases. Subsequently, we have drawn focus on a few key changes that may be applicable to you.
Farm cooperatives and collaboration pilot
The government will rename and refine the two-year pilot program designed to improve farmers’ access to training and information about co-operatives, collective bargaining and innovative models. The pilot previously announced in the Agricultural Competitiveness White Paper (the White Paper), will be delivered by Southern Cross University and will focus on helping farmers to establish cooperatives and adopt innovative business.
15 extra financial counsellors (maintained)
For those in drought-affected areas, the government will continue funding for 15 extra financial counsellors to assist farming families in managing issues associated with drought and drought recovery. The additional $7.1 million over four years from 2016-17 is to maintain the additional rural financial counsellors in drought-affected areas. The original funding was a one-off measure for 2015-16. The funding targets regions in need, based on prevailing drought conditions.
National Water Infrastructure Loan Facility
States and territories will be able to access concessional loan funding to support major water infrastructure projects. The $2 billion funding (over 10 years from 1 July 2016) will be provided to establish the National Water Infrastructure Loan Facility. Applications for loans will be assessed against the project’s cost effectiveness and financial viability. The loan recipient will make interest-only payments for up to the first five years of the loan term, and will then have a further 10 years to repay the principal and any additional interest. The project is expected to generate affordable water to grow regional communities.
Export and regional wine support package
The government will provide the Australian Grape and Wine Authority with $50 million over four years to promote Australian wine and wine tourism both domestically and overseas.
Biosecurity advanced analytics capability
The Department of Agriculture and Water Resources will be provided with funding of $15.9 million over four years to build an advanced analytics capability to better support biosecurity decision making.
National register of foreign ownership of water entitlements
The Government will introduce a new National Register of foreign ownership of water entitlements and require foreign persons to notify and update their interests in water entitlements with the Australian Taxation Office (ATO), effective from 1 July 2017.
Small business now $10M turnover
Although not specifically for the primary production sector, the extension of the small business definition to include business with up to $10 million turnover will provide a number of benefits for many farmers and businesses in the agricultural sector.
The Government will increase the Small Business Entity turnover threshold from $2 million to $10 million from 1 July 2016. The current $2 million turnover threshold will be retained for access to the small business capital gains tax concessions, and access to the unincorporated small business tax discount will be limited to entities with turnover less than $5 million.
Businesses with a turnover of less than $10 million will be provided greater access to a wide range of tax concessions that were previously only available for small businesses under $2 million turnover, such as:
- the immediate write off for plant and equipment purchases costing less than $20,000 (until 30 June 2017);
- pooling depreciation assets that cost more than $20,000 and the ability to claim a 15% deduction in the first year, a 30% deduction each year after the first year and the ability to write-off the balance of the pool once the pool is less than $20,000 (before applying any depreciation for the year); and
- lower company tax rate 27.5% from 1 July 2016.
Agricultural Competitiveness White Paper
Farm Management Deposits
The Agricultural Competitiveness White Paper was released on 4 July 2015. The White Paper sets out the government’s roadmap of forthcoming initiatives targeting the agriculture sector. Amongst these was the decision to provide for more concessionary Farm Management Deposit (FMDs) arrangements.
The changes to FMDs are contained in Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016. This Bill lapsed on prorogation of the Parliament resulting in the possibility that the changes would never be implemented. However, when Parliament was recalled for the Federal Budget on May 3, the Bill passed the senate and received Royal Assent on May 5.
The Bill changes the income tax treatment of FMDs by:
- increasing the maximum amount that can be held in FMDs by a primary producer to $800,000;
- allowing primary producers experiencing severe drought to withdraw an amount held in an FMD within 12 months of its deposit in the income year following deposit without affecting the income tax treatment of the FMD in the earlier income year; and
- allowing amounts held in an FMD to offset a loan or other debt. This should result in a lower amount of interest charged on the loan than would otherwise be the case
For more information on changes in the agricultural sector, ask us a question online via ASK Crowe Horwath, or contact your Crowe Horwath representative today.