Reap the rewards of primary production tax deductions

Earn more from your agribusiness

Operating an agribusiness can be tough. From extreme weather conditions to commodity price variation, farmers face an array of challenges each season. Often these challenges cause financial strain and significantly impact a primary producer’s bottom line.

Claiming primary production tax deductions can help farmers during times of financial hardship by reducing their tax liabilities.

In fact, BMT Tax Depreciation found an average of $99,729 in first full year depreciation deductions for our agricultural clients and saw a 5 per cent increase in the number of depreciation schedules requested in FY 2018/2019.

Like owners of other income-producing properties, farmers are eligible to claim both capital works deductions for structural and fixed assets and depreciation for any plant and equipment assets found in an agribusiness.

The general depreciation principles apply to most depreciating assets used in primary production. However, there are specific primary production tax deductions available to help those in the agriculture industry. For example, water facilities, fencing and fodder storage assets all have industry specific depreciation rates.

  • Water facilities: primary producers can claim an immediate deduction for expenses incurred primarily for conserving or conveying water for an agribusiness. This can apply to water facilities such as dams, tanks, bores, irrigation channels and pumps. Both landowners and tenants are eligible to claim these immediate deductions in the year of the expense if the item was purchased after the 12th of May 2015.
  • Fencing: primary producers can also claim an immediate deduction for the cost of fencing if it’s used primarily for agricultural operations and was acquired after 12th May 2015. If fencing was purchased before then, farmers can deduct the asset’s cost over its relative effective life.
  • Fodder storage: farmers are also eligible to claim a deduction for the total cost of a fodder storage asset if the expense was incurred on or after the 19th of August 2018. Primary producers can claim this deduction if the expense was incurred prior to this date, but the asset was installed and ready for use after the 19th of August 2018. In addition, assets installed before the 19th of Aug 2018 but after the 12th of May 2015 can be claimed over three years.

Agribusiness owners can only claim a deduction under primary production rules if no-one else has deducted an amount for the asset under these conditions. However, some farmers may be eligible to claim deductions for second-hand assets under the instant asset write-off rules as a small or medium business.

The federal government recently extended eligibility to claim instant asset write-off concessions to businesses with revenues of less than $50 million and increased the threshold from $25,000 to $30,000 until the 1st of July 2020.

As depreciation regulations vary for agribusinesses, obtaining a depreciation schedule is the best way to ensure your primary production tax deductions are maximised and lodged correctly.

Primary production case study: $1.45 million sheep farm depreciation

Let’s look at some of the plant and equipment assets BMT found for the owner of a sheep farm purchased for $1.45 million.

Sheep farm assets
Asset Depreciable value
Fuel storage tanks $7,976
Furniture freestanding $10,941
Loading ramps $10,953
Shearing equipment $15,576
Solar powered generating systems $33,824
Wool bins $1,412
Wool presses $12,941
Wool sheds $175,902
Total assets listed $269,525
Assets not listed $98,889
Total $368,414

Overall, BMT found $368,414 in plant and equipment assets that could be claimed at the appropriate depreciable rate. In addition to these items, $175,669 in capital works deductions can be claimed over the life of the property by the owner of the sheep farm.

Discover the depreciation deductions for a primary production business

To find out how much you could be claiming from your agribusiness Request A Quote today.