Does your agricultural business have too much money?
Financial year 2018 is shaping up to be a big year for our farming clients. Sheep farmers in particular are seeing great wool and lamb prices, while beef prices are nothing to laugh at either.
These great prices are driving a number of questions from our small business farming clients. What can I do with this extra income? Should I pay down some debt? How can I spend it as tax effectively as possible?
Here are some ideas.
One of the most tax effective deductions is making repairs to your existing equipment, sheds, vehicles, stockyards, driveways and other assets. Every dollar spent on repairs is deductible unless you make significant changes to the asset. Make sure you don’t significantly upgrade the asset though as this claim is about repairs and not upgrades. So fixing a stockyard fence is fine, but moving it to fit an extra 50 head of cattle isn’t classified as repairs.
Previously Water Facilities have been written off over 3 years but now an immediate deduction is allowed. Water Facilities include such things as new dams, tanks, irrigation channels and irrigators but exclude second hand purchases. Handy things to remember about Water Facilities is that there is no upper limit to your claim and certain items may be financed over time (irrigators etc) requiring less cash up front.
Building new fences is another item that has previously been depreciated over time and now can be claimed immediately. This does not include stockyards as that is a structure and depreciated over time.
Assets < 20k
Most people in small business know that assets costing less than $20k can be written off immediately so this is a very helpful deduction if you need any equipment in that price bracket. A couple of tricks and traps are that the assets must not be covered under another rule (water facilities or buildings for example) and the after GST cost must be less than $20k.
A less immediate deduction is building or purchasing new Fodder Storage assets which can be depreciated over 3 years. This includes silos, grain bins, sheds, hay sheds and barns.
A couple of other ideas include using Farm Management Deposits and making superannuation contributions. As always though, call your accountant for a chat about your plans and the options as certain things may be better for you and your situation.
Note: The above information has been sourced from www.ato.gov.au and is provided from a small business perspective. If your turnover is $10 million or greater please contact us.