Predicting a More Profitable Future for Australia’s Agribusinesses: Farm Tax Tips From Sharp Accounting

With good weather and record prices prevailing in 2021, it was a strong year for agribusiness. The Australian Bureau of Agricultural and Resource Economics and Sciences suggests that the boom will continue through 2021-22. In fact, the bureau predicts that Australia’s agricultural industry will reach a record-breaking $81 billion this financial year – more than $12 billion higher than last year’s amount (which was itself a record). So, with profits flowing in, what should agribusiness owners be thinking about when it comes to farm tax planning? 

Consider the Structure of Your Farming Business

Common structures for Australian farms include partnerships, corporations, proprietary companies limited by shares, public companies limited by shares, public companies limited by guarantee, joint ventures, and cooperatives. Each of these structures come with benefits and drawbacks. Unfortunately, it’s not uncommon for us to see farms set up with a structure that doesn’t best suit the owner’s individual circumstances. 

The structure of the legal entity you choose for your farm impacts all aspects of your operations and your succession planning. It is critical that you implement a corporate structure that: 

• Protects your existing assets. 
• Considers your retirement – and your family’s future.
• Offers flexibility for tax planning. 
• Allows you to pay out profits to family members.

If you’re uncertain about whether your farm is set up correctly, reach out. Our accountants would love to help. 

Farm Tax Planning Tips: Take Advantage of Assets Writeoffs and Livestock Plans This Financial Year

If you’re certain your business is structured for your future, it’s time to consider your tax planning for the remainder of the 2021/22 financial year. 

Implement a Livestock Selling Plan

With strong livestock selling prices, farm managers may wish to consider implementing a livestock selling plan to minimise tax liabilities for the 2021-22 financial year. A livestock selling plan considers your existing inventory and plans to purchase and sell the livestock and adjusts it to achieve better taxation outcomes for your farm. 

Instant Asset Write-Off Incentive to End on 30 June 2023

The pandemic-era instant asset write-off for eligible businesses has allowed for the immediate deduction of the business portion of the cost of assets in the financial year in which it was first used or installed. This incentive looks set to conclude during the 2023 financial year. However, there are tax initiatives that will continue beyond the 2022-23 financial year, including:

Immediate Deductions for Fencing and Fodder Storage Assets

Since 2018, primary producers have been permitted to immediately deduct the cost of fencing and fodder storage assets, including installing silos and building haysheds. This initiative will continue beyond the 2021-22 financial year. 

Landcare Operations Deductions

Primary producers can claim a deduction for capital expenditure on landcare operations in Australia. This includes exterminating pests, eradicating detrimental plant growth, preventing or combating land degradation, and drainage control, amongst other things. Fire preparedness and prevention expenditure is also deductible for eligible primary producers. 

Make the Most of the Pandemic-Era Instant Asset Write-Offs

Many farms have already purchased larger assets to take advantage of the current instant asset write-off. If you’ve had a better-than-usual year in 2021-22, it might be worthwhile investing in smaller assets you’ve been considering while the instant asset write-off incentive is available.

Sharp Accounting: Strengthening Profitability in Agribusiness

At Sharp Accounting, we work with agribusinesses to build resilient and agile financial plans. We partner with you to plan for your profitable future – considering your longer-term succession plans, as well as your shorter-term tax minimisation planning. 

Reach out if you’re looking for an accounting partner who knows agribusiness: