On Farm Accommodation

Article by Justyna Balowska

On-farm accommodation is a topic that often comes up in conversations with our clients for various reasons, such as housing workers, family members, or diversifying income through agritourism. Understanding the income tax, GST and Fringe Benefits Tax implications of such investments is crucial for maximising benefits and ensuring compliance with tax laws. The key considerations when investing in on-farm accommodation. 

What is On-Farm Accommodation? 

On-farm accommodation refers to housing provided on the farm property (primary production land) for occupants like employees (permanent and seasonal), contractors, family members or tourists. It can range from temporary housing like caravans and mobile homes to permanent structures such as farmhouses or dongas. However, claiming accommodation expenses for a boat may be challenging. 

Tax Deductibility of On-Farm Accommodation 

The income tax treatment of on-farm accommodation can be complex and depends on various factors, including the purpose of the accommodation, its usage, and land ownership. Here are some general guidelines: 

Accommodation for Employees 

Expenses related to constructing and maintaining housing for unrelated employees are generally tax-deductible and could potentially be added to your small business pool. However, utilities costs may not always be tax-deductible, and consideration has to be given to Fringe Benefit Tax (FBT) consequences of providing those noncash benefits to your employees. 

The ability to claim GST on expenses depends on whether the accommodation is considered camp-style, similar to that mines offer their employees with shared facilities or residential self-sufficient accommodation. If you were eligible to claim the GST on these expenses, and did not, you are unable amend your Business Activity Statement to claim it later—an oddity of the GST law. 

Providing accommodation will likely trigger Fringe Benefits Tax, but the remote area exemption applies to much of Western Australia. 

Accommodation for Family Members 

Expenses for use of housing by family members are typically not tax-deductible. Complexity arises where family members are also employees. 

GST would also be non-deductible, but costs associated with maintaining a home office may be claimable. 

Accommodation for Agritourism (Including Renting to Contractors) 

Costs associated with offering agritourism services, such as farm stays, are generally tax-deductible. However, the income tax treatment of building or purchasing the house will be different to the treatment if the house was used by the farm employees. This also includes renting to non-farm contractors or unrelated parties for longer periods. 

Income earned from these activities must be declared in the landowner's tax return, with relevant deductions claimed against this income. GST would most likely not apply if you are not in the “business of renting,” despite the fact that the farm is registered for GST.  

On-farm accommodation can offer significant benefits and efficiencies, but it is a complex area of tax law and requires careful consideration and planning. It is a significant investment in your business and not planning effectively can leave thousands of dollars on the table or open your business up to significant penalties. Speak with a Byfields accountant today to ensure you are getting the most from the accommodation you are providing. 

To discuss further please contact your Byfields accountant. 

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