Benefits of being a Primary Producer

Article by Ryan Naughton

Racking my brain this week to come up with an interesting topic for a farm weekly article, seeing that tax planning, structures and succession articles have all been well and truly covered, I thought why not an article on some of the specific benefits the ATO allow farmers.

The following is a list of some of the specific benefits available to farmers and farming businesses in general.

You may be aware of some of these items but if not please make sure you are in contact with your advisers to ensure you are taking advantage of them where they may be applicable:

Primary Production specifically:

• Primary Production Averaging and using this to your advantage.
• If your averaging rate is working against you, you do have the ability to sometimes either elect out of averaging or otherwise re-start your history in certain circumstances – This one is sometimes overlooked
• Farm Management Deposits and having a long term strategy behind their use
• Farm Management Deposits and their potential utilisation with minors
• Immediate Write Off of water facilities, fencing and fodder storage assets.  Whilst the temporary full expensing of assets has now ended, you can still take advantage of the original immediate write off rules that were in place for certain primary production assets.
• Revalue Stock on hand – You have the ability to value items on hand (livestock, grain etc) at three different rates (selecting the option that suits your circumstance) – This can be very effective in a loss year.
• Prepayment deductions – Some expenses can be prepaid up to 12 months in advance
• Livestock deferral – In relation to the forced sale of livestock (drought, fire etc) you have the ability to defer the profit made on the sale over a 5 year period
• Double Wool Clip – similarly if you have a double wool clip due to seasonal circumstances you can defer the proceeds to the following year.
• Ability to access generous Capital Gains Tax Concessions on offer in a lower income year.

General planning items:

• Utilisation of superannuation in general, including using other family members and those already in pension phase.
• Ensuring your structure is working for you, including the use of companies and corporate beneficiaries where applicable.
• Utilising any government benefits available to your advantage – Commonwealth Senior Health Care Cards, Family Tax Benefits, any of the specific farm related grants on offer
• Negative Gearing / Crystalizing CGT losses where it can work to your advantage
• Taking advantage of the many benefits associated with being classified as a Small Business Entity

The above is by no means an exhaustive list, but it does show that there are many tools in the toolkit available to you.  Now most of you would be aware of the majority of the above items but if there are any new ones that you think may be applicable that you are not currently utilising, please make sure you check to see if it may be of use with your current adviser.