My wife and I are dairy farmers who have recently converted to a beef enterprise. We will need to build new fences, enlarge a dam and install a new silo. Can I claim a tax deduction for these?
Changing your farm can be both an exciting and challenging time, so it’s good to understand what you can and can’t claim.
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The good news is that since 12 May 2015 primary producers have been able to claim an immediate write off for capital expenditure spent on water facilities and fencing assets.
Also, you can write off the cost of fodder storage assets over three years. This includes your costs associated with any alterations, additions, extensions, some repairs and other costs that are related to your fodder storage asset. For example silos, tanks for the storage of liquid feed supplements or hay sheds.
Something to keep in mind when purchasing any second hand fodder storage assets is that your ability to claim a tax deduction is dependent on the history of that asset prior to your ownership. A deduction can only be claimed under certain circumstances. For example, if you can show that no-one else has deducted (or could have deducted) the cost of the silo under these new rules, then you would be able to. Otherwise you’ll have to claim the silo under the old depreciation rules.
If your farm is a small business entity, (i.e., your annual turnover is less than $2 million), then you are also eligible for an immediate tax write off for the purchase and installation of plant or equipment that costs less than $20,000.
This means you have can use this measure instead of a three year write off for fodder storage. For example, a silo that costs less than $20,000 can be written off immediately, rather than over three years.
This is just a brief overview of how the write off rules can apply to farmers.
As you have recently switched from producing dairy to beef, it is important that you consider your financial position and what works best for you.
We would recommend discussing this further with your accountant or business advisor.
* If you would like more information on this topic or have a question please e-mail me at albury@crowehorwath.com.au.
Any information in this article has been prepared without taking into account your personal circumstances. You should seek professional advice before acting on any material.
While reasonable care is taken in the preparation of this information to the extent allowed by legislation, Crowe Horwath (Aust) Pty Ltd ABN 84 006 466 351, accepts no liability whatsoever for reliance on it.
