Tax breaks announced in the 2015 Federal Budget were formally passed by the Senate yesterday, meaning small businesses can now claim an immediate tax deduction on any asset they buy costing up to $20,000. Here specialist rural accountancy firm Powers Financial Group breaks down what the new measures mean for Australian cattle producers.
IN LIGHT of the recent announcements in the Federal Budget, there has been much discussion relating to accelerated depreciation for primary producers.
These measures will offer great reprieve to Australia’s primary producers, who continue to face unstable income as periods of drought and flood plague the nation.
It is extremely important that these new measures be utilised in the best way possible to assist the growth of farming businesses.
The announcements involve multiple forms of accelerated depreciation, which from a glance, can be quite confusing.
The first budget measure, which applies to all businesses, is the immediate deduction of all assets purchased for under $20,000.
This means that, for small businesses, there is an immediate write off where any asset is purchased for less than $20,000, not including GST.
Where an asset is worth $20,000 or more, the asset expense cannot be split, thus would be depreciated under the regular rates.
A business is considered a small business where turnover is less than $2M. Your Accountant will be able to advise your eligibility for these deductions.
In practical terms, a small beef farming business can purchase a tractor on 13 June 2015 for $21,999 including GST, an upfront deduction of $19,999 can be deducted in the 2015 tax return. Under the previous measures this would have been deducted at 30%.
For primary producers, specific deductions have been introduced which will enable an immediate deduction on fencing and water facilities, whilst fodder storage assets can be depreciated over three years.
‘these measures will make a significant impact to primary producers going forward’
Under the current law, water facilities are deducted over three years and fences over thirty years.
As of 12 May 2015 water facilities and fencing can be deducted immediately regardless of the purchase price.
Primary producers can also now depreciate fodder storage over three years rather than the previous depreciation period of fifty years.
These additional measures will provide the opportunity to improve cash flow and better prepare properties for the unpredictable seasons that can be associated with working on the land.
Where a primary producer is also a small business, they must choose between the small business write off and primary production-specific depreciation methods.
For example, where a silo is purchased for $18,000, the asset can be depreciated over three years or immediately deducted.
These measures can make a real difference to Australian Primary Producers!
Below is an example which shows the dramatic increase in depreciation that can now be claimed.
|Asset||Cost||Pre-Budget Depreciation||Post-Budget Depreciation|
|Portable Cattle Feeder||3,000||42||1,000|
As demonstrated, these measures will make a significant impact to primary producers going forward.
Powers Financial Group specialises in working with primary producers and has a team of more than 70 people working across four offices located in Biloela, Brisbane, Rockhampton and Monto.