Our rich and diverse farming landscape has evolved over time and several primary producers in the Bundaberg Region have moved from sugar cane into avocados, macadamias and other small crops.
But did you know that changing your crops also comes with changes in tax rules?
Deducting the cost of horticultural crops such as avocados and macadamias is based on the capital expenditure incurred in establishing the plants. This may include costs to acquire the plant, ploughing, contouring and topsoil enhancement. The deduction is then spread over the effective life of the plant and the first claim comes in the year the plant produces income and the crop is sold commercially.
Primary producers can also claim an immediate deduction for the cost of certain capital assets such as plant and equipment, fencing and sheds—providing the shed is primarily and principally used for the purpose of storing fodder (hay or straw) for cattle and other livestock. As always there are certain rules that need to be met to claim these deductions.
Farm management deposits can help primary producers with uneven income flow by enabling them to set aside pre-tax income that can be drawn upon in future low-income years. Deposits made to a farm management account can be claimed as a tax deduction, which is beneficial in high-income years. When the money is withdrawn it forms part of assessable income, which is worth actioning in low-income years.
You have no doubt by now received your tax bills for the 2020–21 financial year and I would strongly recommend you begin your tax planning for the end of next financial year. Tax planning allows us to work with our client to minimise their tax burden ethically and morally, and to ensure you pay the least amount of tax allowable by law.
This advice is general in nature and is not personal financial advice.
Karen Peall is the Executive Manager of Lyons Judge Bundaberg and has more than 20 years’ experience in accounts and taxation.