Primary Producers

Primary Producers – The Important Questions

This list identifies and summarizes the main tax issues that arise for primary producers.

This is an area the Australian Taxation Office takes a lot of interest in as it sees it as an area where a threat to the nation’s revenue exists. Consequently there are many complicated rules in place and it is best that you see a FORSYTHS specialist in the area of taxation in primary production before you sign any purchase documents, finance documents or any other major decision regarding transfer of assets.

General issues

  • What is primary production?
  • Why is carrying on a business of primary production important?
  • What factors are taken into account in determining whether a business of primary
    production is carried on?
  • What evidence is relevant in establishing that a primary production business is being carried on?
  • What are some examples of a primary producer’s business income and deductions?
  • PAYG installment considerations for individual primary producers

Trading stock issues for a primary producer

  • What is trading stock for a primary producer?
  • Valuation of livestock
  • Use of livestock accounts
  • Horse breeding stock
  • Special trading stock rules that apply to small business entities
  • Deferral of profit from forced disposal or death of live stock
  • Special rules relating to trees, growing crops etc.
  • Insurance recoveries for loss of livestock or trees

Averaging of income

  • What general issues apply to averaging of income?
  • What assessments do the averaging provisions apply to?
  • What is the nature of the adjustment to tax?
  • What is the amount of the averaging adjustment?
  • What tax is payable when the averaging provisions apply?
  • Permanent reductions.

Specific deductions available for primary producers

  • Landcare operations
  • Water facilities
  • Establishing horticultural plants, including grapevines
  • Connecting electricity supplies
  • Telephone lines
  • Common provisions for specific deductions

Farm management deposits

  • What is an FMD?
  • Tax treatment of FMDs

Other tax rules

  • In certain circumstances, primary production losses may not need to be deferred under the non-commercial loss rules
  • There are some exemptions from the rules that treat uncommercial transfers of assets by private companies to their associates as assessable dividends
  • Various natural disaster concessions apply

GST aspects

  • Concessions apply where a farm is sold as a going concern, or where farmland is sold or subdivided
  • Various other GST rules affect primary producers


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