Recipients of recovery grants paid in the wake of last year's live export ban to Indonesia will have to return at least 30 percent of the funds to the Government via the tax system at some point in the future.
The Federal Government has confirmed to Beef Central this week that financial assistance paid to businesses and individuals affected by its temporary suspension are considered assessable for income tax purposes.
The decision to suspend all live exports to Indonesia after footage of cattle being mistreated in the market was broadcast on ABC Four Corners resulted in extensive financial losses for hundreds of business and individuals directly involved in the trade.
It deprived many of an income for months, and created a cash flow crisis throughout the northern cattle industry.
In recognition of the hardships created by its ban, the Government made available cash grants of up to $25,000 to help those directly affected to meet financial commitments until the trade was up and running again.
It also offered interest rate subsidies for two years on loans of up to $300,000 borrowed from commercial lenders.
The Department of Agriculture, Fisheries and Forestry confirmed this week that payments through the Business Assistance Package and the Subsidised Interest Rate Scheme are considered as assessable income under the Income Tax Assessment Act 1997.
Citing advice from the Australian Taxation Office, DAFF said that as the assistance was paid to farm and service industry businesses to continue those businesses, "the payments needed to be included in the assessable income of the business".
In terms of GST status, the payments to farm and service industry businesses were not considered as a taxable supply, so the payments were not subject to GST.
The DAFF spokesperson said that not exempting Government assistance from tax was consistent with many other government grants and payments, and said the taxation treatment of the grants was clearly identified in the policy guidelines for the assistance.
“As always, individuals should seek professional advice on any taxation implications of government payments,” the department said.
Payments made under other grant programs such as the Climate Change Adjustment Program, Exceptional Circumstance Interest Rate Subsidies and Building Farm Business Grants were also treated as assessable income.
The tax claw-back effectively reduces the amount of money available, and means the actual benefit is much less than that promoted by the Government.
Accountant Michael Vail, Tre Ponte Corporate, Brisbane, said a company paying 30 percent tax that received the full $25,000 grant will at some point have to remit $7500 back to the government via the tax system. The amount would be $10,000 for an individual on a tax rate of 40pc.
Northern cattle industry leaders say the tax assessability component may have been included in fine detail but should have been made clear to eligible recipients when they were announced.
The Northern Territory Cattleman’s Association said the tax hit would create an additional burden on those affected by the ban.
“It certainly does not seem fair that the government can take 30pc or more of it back in the form of tax,” NTCA chief executive officer Luke Bowen said.
“For some businesses they may not make a profit however the losses that they incur are carried forward so ultimately it will catch up to them.
“It is perhaps something that in the heat of the crisis slipped through the cracks, however producers one way or another have been left with a bill that will fall due when they may finally be able to pull themselves of the hole that last live export ban created. “