To help you understand the opportunities you should be discussing with your tax advisor, we’ve prepared a list of the tax rules farmers should consider in relation to tax planning this year.
While some of the relevant tax concessions that may be available to farmers apply to business taxpayers generally, there are several tax concessions available only to farmers and agribusiness.
For a high-level overview of what you can and can't claim this tax season, download our "Is it tax deductible?" checklist here.
A small business entity (SBE) is broadly an entity that carries on a business with an annual aggregated turnover of less than $10 million.
If your farm business-entity is an SBE that chooses to apply the simplified depreciation rules, then you can claim an immediate deduction for eligible fixed assets that cost less than $20,000.
Assets costing $20,000 or more will be added to a pool and depreciated at 15% in the first year and 30% in subsequent years.
To claim depreciation in the 2025 financial year, the asset must be first used or installed ready for use by 30 June 2025.
Taxpayers engaged in a primary production business can claim an immediate deduction on the cost of the following assets:
Water facilities, e.g. dams, tanks, tank stands, bores, wells, irrigation channels, pipes, pumps, water towers and windmills, and costs that are reasonably incidental to conserving or conveying water such as a culvert, a fence to prevent livestock entering an irrigation channel and a bridge over an irrigation channel;
Fencing assets;
Fodder storage assets, e.g. silos, tanks, bins, sheds and above ground bunkers used to store grain and other animal feed;
You can claim a deduction for capital expenditure incurred on a landcare operation in respect of land used in a primary production business.
Landcare operations include:
Erecting a fence to separate different classes of land in accordance with an approved management plan for the land.
Erecting a fence for the primary and principal purpose of excluding animals from areas affected by land degradation.
Constructing a levee.
Constructing drainage works for the primary and principal purpose of controlling salinity or assisting in drainage control. However, it does not include an operation for draining swamp or low-lying land.
A repair of a capital nature, or an alteration, addition or extension to an asset listed above.
An operation primarily and principally for the purpose of: eradicating or exterminating animal pests from the land; eradicating, exterminating or destroying plant growth detrimental to the land; or preventing or fighting land degradation.
You can deduct the costs of establishing horticultural plants over their effective life. If the effective life is less than three years, the establishment costs can be written off in full. Otherwise, you can write off the establishment costs over the maximum write-off period as specified by the Commissioner of Taxation (Commissioner).
You may be able to claim a deduction over ten years for capital expenditure incurred on connecting or upgrading mains electricity to land on which a business is carried on, or installing or extending a telephone line on land on which a primary production business is undertaken.
If your farm business structure involves a trust, then it is crucial that the Trustee prepares a resolution to distribute income to beneficiaries prior to 30 June (or earlier as required by the Trust Deed). Failure to do so may result in the Trustee being taxed on profits at the highest marginal rate of tax (45% + Medicare levy) or distributions being assessed to default beneficiaries.
Beneficiaries must also be notified of their entitlement to trust income by the earlier of the due date and actual date of lodgement of the Income Tax Return for the trust.
Tax planning with your tax advisor should be undertaken well in advance of 30 June to ensure the resolution can be made with tax effective considerations in mind.
Primary producers can elect to apply the income tax averaging regime, which acts to smooth out your income and tax payable over a maximum period of five years. Your income may spike or drop in one or two years due to such events as price increases or decreases, natural disasters or changes in demand.
Broadly, where your annual income exceeds the average, you will receive a tax offset to reduce your tax payable, and if your income is below the average, you will have to pay extra tax. You can elect to withdraw from the averaging system for ten income years and pay tax at ordinary rates. It is a non-revocable election, and you cannot re-enter the averaging system until year 11.
A farm management deposit (FMD) can be used to shift income from good years to bad years to manage seasonal fluctuations.
To claim a deduction for an amount deposited into an FMD, you must:
Be an individual (including a partner in a partnership or a beneficiary of a trust);
Be carrying on a primary production business in Australia when you make the deposit;
Have no more than $100,000 in taxable non-primary production income in the income year you make the deposit;
Make a deposit of at least $1,000;
Hold no more than $800,000 in total in FMDs.
The amount must remain deposited in the FMD account for at least twelve months. If you withdraw an FMD, the amount of the deduction previously allowed is included in your assessable income in the year of withdrawal.
There is a concession to permit an early withdrawal of an FMD within twelve months if you are affected by a natural disaster or a severe rainfall deficiency. The amount withdrawn is still assessable income in the year of withdrawal, however, you will not lose the earlier deduction.
Your tax advisor can provide more information on how FMDs can be utilised.
Subject to a review of your year-to-date tax position, it may be possible to reduce the amount of your March and June quarterly pay as you go (PAYG) instalments. This can help improve your cashflow now rather than waiting until you lodge your Income Tax Return to receive a refund for overpaid instalments.
If you have any bad debts, ensure these are written off prior to 30 June to claim a deduction. Minutes should also be prepared to formalise the write off.
The non-commercial loss provisions apply to deny an individual from offsetting a loss from a business activity against other income earned during the income year unless one of the following four tests are passed:
The assessable income from the activity for the year must be at least $20,000.
The activity must have resulted in a profit in at least three out of the last five income years, including the current year.
The total reduced cost bases of real property or interests in real property used on a continuing basis in carrying on the activity must be at least $500,000.
The total value of other assets (other than motor vehicles) used on a continuing basis in the activity must be at least $100,000.
There is an exception for primary production and professional arts businesses if your assessable income from other sources not related to that particular business activity is less than $40,000, excluding any net capital gains.
Individuals with an adjusted taxable income of $250,000 or more will generally not be able to offset losses from non-commercial activities against other income.
However, you may be able to request the Commissioner’s discretion to allow you to claim the loss where special circumstances exist.
The non-commercial loss rules only apply to businesses that are carried on by an individual as a sole trader or as a partner in a partnership.
A capital gain on the sale of an active asset that is used in the course of carrying on a business may be reduced if certain basic conditions are satisfied. One of the entry tests is that you must either be a CGT small business entity (carry on a business and have less than $2 million in aggregated turnover) or satisfy the maximum net asset value test (have an aggregated value of net assets of less than $6 million).
The concessions include:
Small business 15-year exemption;
Small business 50% reduction;
Small business retirement exemption;
Small business roll-over.
These very valuable CGT concessions can be complex to understand and apply correctly. We recommended that you contact your tax advisor before entering into a contract to sell a business, farmland or other business asset to determine your eligibility.
Consider the recognition of income leading up to 30 June, such as:
The timing of when sales are made.
The date of signing a contract for the sale of a CGT asset.
Also consider bringing forward deductions prior to 30 June, such as:
Acquiring depreciating assets
Undertaking repairs on property and machinery
Superannuation contributions
Prepaying expenses such as fodder and fertiliser.
Primary producers can elect to spread a profit made from the forced disposal or death of livestock over a period of five years, whereby: land is compulsorily acquired; a state or territory leases land for a cattle tick eradication campaign; pasture or fodder is destroyed by fire, drought or flood; livestock are compulsorily destroyed to control disease or they die of a disease; or you receive official notification about a contaminated property.
Alternatively, an election can be made to defer the profit by reducing the cost of replacement stock in the disposal year or any of the next five income years. Any unused part of the profit will be assessable in the fifth income year.
Wool growers can elect to defer the profit on the sale of a second wool clip to the next income year where there was an early shearing caused by drought, fire or flood.
Discuss with your tax advisor about smoothing the tax on any abnormal profits in an income year made from the forced disposal or death of livestock, or from double wool clips.
The tax rates that apply to resident individuals for the 2024/25 year are:
| Taxable income ($) | Tax rate (%) |
|---|---|
| 0 - 18,200 | 0 |
| 18,201 - 45,000 | 16 |
| 45,001 - 135,000 | 30 |
| 135,001 - 190,000 | 37 |
| 190,001 + | 45 |
Medicare levy of 2% may also apply.
In general, you are required to undertake a stocktake on 30 June of each year. For each type of livestock, record the quantity of the following:
Opening stock (1 July) + purchases + natural increase - sales - deaths - killed for rations = Closing stock (30 June)
Stock can be valued under different methods for each item of stock:
Cost;
Sales value;
Lower market value or replacement cost.
Working with a tax advisor can help farmers and agribusiness owners take advantage of a range of tax planning opportunities that could help reduce their tax exposure this financial year. Speak to a Findex Tax Advisor today.
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