Stronger farmers, stronger economy

The Government has fulfilled an election promise by the release, albeit more than 6 months late, of the Agricultural Competitiveness white paper on 4 July 2015

With a theme of “Stronger Farmers, Stronger Economy”, the Agricultural Competitiveness white paper contains $4 billion of spending measures intended to make the agriculture sector more competitive, profitable and resilient.

We’ve summarised the five key intiatives, and what tax changes may affect you.

The white paper was developed after extensive consultation with the community, including over 1,000 submissions received in response to an initial issues paper and green paper. This is of course, the same process that the Government is currently undertaking with the Tax Reform white paper process.

The initiatives are outlined in the white paper under the following five key priority headings:

1. A fairer go for farm businesses

  • Fairer competition for farm produce
  • Better regulation
  • A better tax system for farm businesses (refer below)
  • 2. Building 21st century infrastructure

  • Water, transport and communications infrastructure
  • 3. Strengthening our approach to drought

  • Preparing for drought and risk management
  • In-drought support, including concessional loans
  • 4. Farming smarter

  • Extended rural R&D for Profit Progamme
  • Better pest and disease management
  • 5. Accessing premium markets

  • Free trade agreements being negotiated
  • Improved biosecurity surveillance and analysis
  • These priorities have been identified in pursuit of nine agriculture policy principles, with the Government’s primary focus being on better returns at the farm gate by reducing costs and unnecessary barriers to productivity and profitability.

    At Crowe Horwath, we are always interested in any tax changes that might affect our clients. The white paper contains some important tax related proposals for primary producers, which are in addition to the measures announced in the recent Federal Budget – for example, depreciation concessions for small businesses for assets costing less than $20,000, and also for new capital expenditure on fencing, water facilities and fodder storage assets.

    The tax highlights in the white paper are:

  • From 1 July 2016, the Government will increase the deposit limit for Farm Management Deposits (FMDs) from $400,000 to $800,000
  • Early access provisions will be introduced for FMDs in times of drought, without affecting tax concessions
  • Restrictions currently placed on financial institutions which prevent FMD accounts being used as a loan offset will be removed
  • Primary producers will be able to opt back into the income tax averaging regime 10 years after they have elected to exit the scheme
  • Taxpayers in drought-affected communities will be able to discuss extended payment or lodgement arrangements and interest-free payment plans with the ATO, who will proactively contact taxpayers in those areas with offers of support.
  • Whilst it is very early days, there are already mixed reviews as to whether the white paper will serve its intended role as a comprehensive and strategic blueprint for the long term prosperity of Australia’s agriculture sector, or whether it is just a collection of “motherhood statements” and Government propaganda.

    Nevertheless, there are certainly some welcome reforms announced in the package, and we encourage you to speak to your local Crowe Horwath advisor to understand more about how they might affect you. Many of our advisors are from farming backgrounds and understand the issues that impact on you.