Don’t fence in deductions for a farm
Rural property owners will receive $153,637 more
During the recent May 2015 federal budget, the federal government announced that farmers will be able to make additional claims from 7:30pm on the 12th of May 2015 in the form of instant deductions for fencing and water facilities.
Previously, fences depreciated over a period of thirty years, while most water facilities depreciated over three years and fodder storage assets over a period of up to fifty years.
Primary producers will now be able to immediately deduct the cost of fencing and water facilities such as:
- Dams
- Tanks
- Bores
- Irrigation channels
- Pumps
- Water towers and
- Windmills.
Fodder storage assets such as silos and tanks used to store grain and other animal feed will now depreciate over three years.
Many smaller farm businesses with an aggregated turnover of less than $2 million can also benefit from the budget’s broader small business initiatives. Their owners can choose to use either the accelerated depreciation for primary producers or the accelerated depreciation for small businesses for each depreciating asset. For example, if a sheep farmer was to invest $19,500 on a new silo to store feed, the farmer could choose to claim an immediate deduction of $19,500 for the silo under the small business rules, rather than choosing to depreciate the asset over three years under the new rules for primary producers.
To examine the difference the recent budgetary measures will have on the depreciation deductions for a farm that qualifies as a small business, below is a comparison table of the first full financial year’s deductions found for common farming assets:
Asset
|
Depreciable value
|
First year deductions
(
prior
to 2015 budget changes)
|
First year deductions
(
after
to 2015 budget changes)
|
Fences | *$72,000 | $10,800 | $72,000 |
Tractor | $92,000 | $13,800 | $13,800 |
Pumps | *$4,600 | $690 | $4,600 |
Water troughs | **$1,250 | $188 | $1,250 |
Irrigation assets | *$16,300 | $2,445 | $16,300 |
Silos (used for fodder storage) | **$19,500 | $2,925 | $19,500 |
Horse shelter | *$48,500 | $7,275 | $7,275 |
Livestock grids | $27,600 | $4,140 | $4,140 |
Barn | $75,500 | $11,325 | $11,325 |
Forage harvester | $105,000 | $15,750 | $15,750 |
Chemical spraying assets | **$3,600 | $540 | $3,600 |
Dams | *$63,500 | $9,525 | *$63,500 |
Total | $529,350 | $79,403 | $233,040 |
Assumptions and Disclaimer
As the table demonstrates, if a farmer acquires all of the above assets after the 12th of May 2015, they will be able to claim an additional $153,637 in depreciation deductions.
For further advice on how the recent federal budget changes have impacted the depreciation deductions for assets in properties used for primary production, consult with one of the expert staff at BMT Tax Depreciation or speak with your Accountant.