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.
- 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
- 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