as featured in the Farm Weekly issue 17 December 2020
There are going to be some very mixed results this season from above average to well below. Ordinarily farm incomes for 2020/21 are going to vary significantly, depending on this season’s results and whether any grain and wool was carried over from last year.
However, with the government’s new depreciation incentives for the full deduction of both new and second hand assets, and businesses with a turnover of less than $10M being able to write off their small business entity depreciation pool balance in full, the 2020/21 year will see many clients have minimal taxable income or tax losses to carry forward.
Like always, planning is crucial so that you and your business can take advantage of these opportunities. Some planning points to consider next year are:
- Withdrawal of FMD’s. Just be careful though, as if you operate in a family trust the loss is quarantined and cannot be offset against any FMD withdrawals which are taxed in your personal name.
- Family Tax Benefits. If you are eligible start claiming this fortnightly, along with any Health Care Card benefits, rather than waiting to claim this as an annual lump sum.
- Vary PAYG instalments due in April and July 2021. These could still be high, based on the higher 2018/19 or 2019/20 years.
- Tax deductible personal super contributions cannot increase a tax loss. However, if your super balance is less than $500K you can use “catch-up super contributions”. Briefly this means if you are eligible and say you don’t contribute your $25,000 in 2020/21, you can contribute $50,000 in 2021/22. So, for those that plan their $25,000 contribution year in year out, consider making that contribution in July 2021, which then falls in the 2021/22 year.
- Capital gains are taxed at your marginal tax rate, which could be low in 2020/21. This could present the opportunity to look at:
- Transferring assets into your self-managed superannuation fund (such as farmland or listed shares).
- Transferring assets between family members (such as listed shares).
- Selling any assets with capital gains.
- Depending on your farm business income, turnover could have dropped to below $2M. This opens up the door to consider transferring farmland with capital gains to the next generation and accessing the small business capital gains tax concessions. These concessions are super complex so always seek expert advice!
In summary, there are many planning strategies that can be considered, even in a low income or loss year. Always make sure you seek good proactive advice, tailored to you and your business.
Disclaimer: This content provides general information only, current at the time of production. Any advice in it has been prepared without taking into account your personal circumstances. You should seek professional advice before acting on any material.