The government has a wide-reaching set of tax rules that they apply to primary production, because this vital part of the Australian economy operates so differently to industry and the corporate world. Unfortunately, it’s not as simple as ticking a box on your income tax and it’s done – the ‘ifs and buts’ are enough to turn the milk sour on a good day.

Luckily Kennas agribusiness experts Helen Warnock and Andrew Landsberg and their team eat tax rules like these for breakfast. They’ve always got your back to ensure your tax takes account of every possible advantage.

Here’s a high-level summary for you to keep in mind the main areas where tax relief or different treatment of income and costs are available to help, depending on your situation.

Averaging the tax rate

If your income from the property meets certain criteria, you can apply to be taxed on the average income/loss of the current year and the previous four years. This won’t apply to income you earn from other sources and doesn’t include some types of one-off income.

We can advise you when it’s to your advantage to be in this system, or whether you should opt out. For example, if you’re winding down production activities or on retirement from a wage-earning job but still have income from your property.

(You might have caught up on Helen’s article in the 8 October edition of Queensland Country Life where she explained the averaging rules in more detail).

Depreciating assets

You’ll have some assets which will fall into the normal rules. But for some primary production assets and some types of capital expenditure that contribute to assessable income, special rules apply. Different tax treatments are available for:

• Water facilities
• Tradeable water rights
• Fencing assets
• Fodder storage assets
• Horticultural plants (and grapevines)
• Landcare operations
• Carbon sequestration rights
• Electricity connections and telephone lines

To complicate things, the government has made recent changes in these rules to assist in economic recovery post-COVID. The instant asset write-off changes are designed to encourage capital investment before 2022, with certain conditions.

Each of these activities need different tax accounting treatment, so check in with your Kennas contact to set up your finances to make the most of depreciation for the new tax year, and beyond.

Abnormal Receipts

In some situations, income from specific grants, subsidies or payments may be exempt or not assessable. For example:

• Grants, government assistance, research and development (Our recent blog detailed how to make the most of funding opportunities and their relevant tax breaks)
• Profit from forced disposal or death of livestock (Kennas covered this topic in this recent blog, if you’d like to know more)
• Insurance recoveries
• Double wool clips – two clips occurring in the same year for adverse circumstances

If you have any unusual or one-off income, it’s wise to check with your accountant about how this will be taxable. You may be able to use one of the special circumstances to your advantage.

Special rules for small business primary producers

Where your primary production enterprise is classed for tax purposes as a small business, you may be able to operate under simplified tax rules, including:

• Simplified trading stock
• Prepaid expenses
• Simplified depreciation rules

For small businesses, this does make financial management much easier, giving you more time and energy to devote to the job at hand.

Got a question? We’re listening.

If you’re not entirely sure that your tax framework is working for you in every possible way, call us to set up a suitable time to talk it over. We’ve been helping Central Queensland’s primary producers since 1896. We’ve always got time to lend a hand with your finances, so you can get on with doing what you do best on the land.