Neil Hooper, Scott Smith, and Mark Murgatroyd recently had the opportunity of educating growers at SEPWA's Esperance Farm Office Management Group (EFOM) event.
Mark Murgatroyd of Byfields presented on the 2021 Federal Budget. The key announcement is the extension to the temporary full expensing rules to 30 June 2023. These measures are the most significant depreciation measures announced in decades. Plant sales and changeovers need to be managed carefully until 30 June 2023, and provisions made for depreciation deductions that will be lower in future years.
Scott Smith of Byfields presented on farm management deposits (FMD). The key takeaway to consider your FMDs in light of the above depreciation rules, plan for future low depreciation years, and potential opportunities to reduce FMD balances.
Neil Hooper of Byfields presented on landholding structures:
One size does not fit all!
Making sure that you choose the correct landholding entity at the time of purchase can save large amounts of capital gains tax and stamp duty down the track.
Ownership options include:
In most cases it is unlikely that purchasing land in individual names or joint names will be the most appropriate purchase option.
The family trust has proven to be a robust choice for farmland purchases, providing asset protection and flexibility for succession planning purposes. However, this is not always the case! As farming businesses grow, and entity structures become more complex, the purchase entity decision is not always a ‘tick and flick’.
We are seeing more land being purchased in companies in order to utilise cash reserves in corporate beneficiaries as a result of farm profits being allocated to these entities.
Purchasing land in superannuation funds is becoming more difficult in recent times. This is due to the increase in land values, and relatively minimal amounts of cash that can be contributed to superannuation each year to allow a purchase of land in the fund.
The considerations are:
Capital gains tax
Division 7A (if any non-trustee companies in your structure)
Land tax (if residential property)
Existing landholding structure
Timeline for the business and the land being purchased
Cost and complexities
Often there is a trade off between many of the above. The key is to ensure all the facts of each situation are considered, and determine what your priorities are.
This process should be well documented to ensure each of the above have been considered, and as a reference point for the future.
Take time to plan and decide the most appropriate landholding entity. Consult with your accountant and advisers before sitting at the table ready to sign the purchase contract!
Ensure they understand your existing landholding structure and know what your future plans are with your business and the proposed land purchase.
The key message is one size does not fit all, and take time to plan! It can save you a lot of money and stress down the track!
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.