Business-as-usual tax incentives
Here are some specific tax considerations for agribusiness.
Scrapping assets: Agribusinesses operate in a harsh environment, so review your asset schedule and identify any assets that have been scrapped.
Farm management deposits (FMD): Primary producers can reduce tax by making a FMD with an eligible financial institution. To be eligible, the individual must be carrying on a primary production business in Australia, can have no more than $100,000 in taxable non-primary production income in the income year the deposit is made, and can hold no more than $800,000 in total in FMDs to a maximum value of $800,000.
If you're eligible for an FMD, you may claim a deduction for the amount you deposit in that income year, provided the deposit amount is not more than your taxable primary production income for the income year and the deposit does not cause your total FMD account balances to be more than $800,000.
The amount can be used to offset a deductible loan (the interest earned on the FMD deposit will not be assessable and interest saved in the deductible loan will not be deductible) There are also concessions to withdraw in drought. The deduction can only offset primary production income. Non-primary production income cannot exceed $100,000 and, when the FMD is withdrawn, the amount is included as assessable income.
Water facilities and fencing: Primary producers can claim an immediate deduction for capital expenditure on water facilities and fencing, regardless of cost.
Fodder storage: Primary producers can claim an immediate deduction for the cost of fodder storage assets.
Deferred profit: Primary producers can elect to reduce any profit earned from the forced sale of livestock due to drought, flood and other extreme events. The profit needs to be returned as income or offset against replacement cattle purchased within five years.
Research & development: If your company is spending money to experimentally solve technical problems or develop new products or services, you may be conducting activities that qualify as R&D under the R&D Incentive. This is a complex area of tax law so please call Advisory Partner to discuss.