As we are on the tail-end of the Fitzgerald region's largest ever grain harvest, we are turning our thoughts towards the new season, and there are vital cashflow and tax planning considerations that should be taken into account.
Many agribusiness owners have been considering the tax implications of this year’s bumper crop. With a lot of farming businesses having already deferred income from the previous years’ harvest, some agribusinesses are potentially in the position of having two years of grain income assessable in the 2021 financial year. As this will have significant tax planning implications, it’s important to start working with your accountant regarding your tax planning strategy as soon as possible.
Tax Planning Strategies
There are a number of tax planning strategies you can put into place to minimise your tax obligation and maximise the profits received for your hard work.
- CONSIDER INVESTING IN FARM AND MACHINERY ASSETS
The Instant Asset Write-Off has been extended in a measure dubbed Temporary Full Expensing. This means you can immediately deduct the business portion of the cost of eligible new depreciating assets, and the cost of improvements to existing assets in your 21-22 tax return.
- CONSIDER DEDUCTIBILITY OF YOUR INPUTS
All farmers are aware of the current high prices and predicted shortages to fertiliser this year. If you haven’t already pre-purchased fertiliser, it may be beneficial to secure your supply as soon as practicable.
- CONSIDER THE USE OF FARM MANAGEMENT DEPOSITS
FMDs enable individuals to divert funds into long-term accounts, thereby avoiding income tax until the money is withdrawn. The catch is that funds cannot be withdrawn within 12 months of deposit, meaning you should only make use of FMDs if you are certain you have the cashflow to defer income this financial year.
There are a number of additional tax planning strategies that agribusinesses may wish to consider this financial year, and this could be a great opportunity to discuss further with myself, Cheryl Murdock.