Article by Ryan Naughton Byfields Director
Harvest is in full swing, the grain’s coming off, breakdowns and blockages, carting logistics, employee blunders, owner stuff ups, harvest bans, school’s finishing, Christmas is coming and you’re telling me I’ve also got to make a decision on how to sell the rest of my grain!
Yes, unfortunately this is all part of the beauty of running a farming business today. So, when making those grain marketing decisions and trying to hit those top prices keep in mind how those different options can affect you from a taxable standpoint (and how choosing the right method can assist you):
Grain Pools – You nominate a certain amount of grain to an open pool and trust the pool manager to sell your grain over the course of the next year or so on your behalf.
Payment options as follows:
Advanced Payment: Approximately 80% of your proceeds are received and assessable at harvest with the following 20% in the following financial year.
Deferred Payment: All proceeds received and are assessable in the financial year after harvest with roughly 70% coming through in July and the following 30% when the pool finalises (likely the following January)
Quarterly Payment: Proceeds are received in payments throughout the year. Typically, 40% will be assessable in the year of harvest (April) with the remainder coming in the following financial year (July, Oct, Jan payments).
Harvest Loan: Has the same assessable properties as the quarterly option (40% in year of harvest with the remainder in the following financial year) but for cashflow purposes you receive approximately 80% of the EPR at harvest (as a loan) and the remainder once you pay off the original loan drawn and the pool pays out.
Flexi Drawdown: Very similar to the harvest loan option, has same assessable properties as the quarterly option, but instead of automatically drawing 80% of the EPR at harvest, you can draw the proceeds down up to that level as you need them throughout the year.
Selling for Cash – As the name suggests you forgo the pool option and sell your grain for cash and the grain is generally assessable when you receive it, except for the following circumstances:
Deferred Payment: Grain delivered and contract accepted but payment delayed. For those on accrual accounting this option generally means the grain will be assessable when the contract is struck rather than when the cash is received (so for tax purposes assessable in the year of harvest).
Deferred Delivery: Price generally locked in but physical delivery and payment not made until after June. This option generally allows the grower to defer the proceeds until the next financial year.
So in short, grain marketing isn’t just about price, it’s also a tax-planning and cashflow management tool.
This is general advice only. Grain marketing options continue to evolve each year, and the most suitable option will depend on your individual circumstances. If this area is of interest to you, please make sure to contact your Byfields accountant for some pro active advice and arrange for a pre harvest estimate to be completed.