Tax breaks help farmers go shopping

Claas Lexion 760TT
Claas Lexion 760TT

Driverless tractors and drones might not be on many farmers’ shopping lists just yet, but spending on new farm technology products has undergone a notable lift since tax breaks worth up to $20,000 were introduced last year. Source: Farm Weekly

Business-related investments in gear valued at $20,000 or less – anything from farm computers and software to satellite guidance technology, pumps and post-hole diggers – will qualify for a full depreciation allowance until the end of the 2016-17 financial year.

Until last May’s federal budget, depreciation on newly acquired equipment worth $20,000 would have entitled a farmer to only about a $855 depreciation saving on their tax bill in the first year, with diminishing refunds stretching out over future years.

Although the tax refund only extends to farms with an annual sales turnover of $2 million or less, Commonwealth Bank of Australia (CBA) research suggests the government’s small business package has been directly responsible for guiding smarter technology investment intentions by many farmers.

Among those currently seeking to boost investments in plant and equipment, fixed infrastructure and innovation initiatives, around 40 per cent confirmed the allowance positively influenced their purchasing intentions.

For beef producers the figure was above 60 per cent.

Main investments ranged from small tractors and tractor attachments, to fencing materials computer software and GPS equipment for auto-steer and farm mapping work or livestock tracking products.

Sheds, and fencing materials and irrigation gear to assist drought preparedness investments also fall into a similar depreciation write-off deal, with no limit on what can be spent to qualify.

CBA’s regional and agribusiness executive general manager, Geoff Wearne, said while there was a lot of interest in potentially using drones to help monitor, crops, livestock and water infrastructure, that technology was still too pricey for most farmers.

“But like driverless tractors, sensor technology on drones, and other similarly innovative equipment, is evolving quickly and prices will come down,” he said.

Mr Wearne noted while grain prices were lacklustre at present, graingrowers were still spending on new gear to help them reduce time, labour and other input costs and therefore cushion the blow of lower commodity prices.

Livestock tracking technology was also becoming more common to help producers monitor stock health, feeding trends and make management tasks more efficient.

Aside from the activity prompted by the investment allowance tax rebate, asset financing for big budget cropping equipment was relatively strong, with the leasing cycle for tractors and harvesters enjoying a busy trend at present.

“When you consider our historically low interest rates and the flow-on benefits of rising Asian demand for Australian agricultural products, there is quite a bit of incentive for farmers to grow their businesses and increase their productivity and profits levels,” he said.

The past year’s spending intentions demonstrated farmers were optimistic about the future and committed to growing the industry, with the tax depreciation concessions nudging farmers to invest in better practices which could lift profitability industry-wide.

South Australian and NSW farmers were the most positive about their investment outlook as a result of the tax incentive (53pc and 51pc respectively) followed by Tasmanians (44pc).

Almost one in five grain and livestock growers said it had a major influence, but in SA and Tasmania more than half in these sectors had responded to the tax incentives.

For fixed infrastructure assets such as sheds and fencing, 41pc said tax concessions had a positive impact, particularly in NSW (48pc), Victoria (41pc) and SA (40pc).

Tax specialist with big NSW farm accounting firm Boyce and Company, Iain Elliott, at Cooma, said the three year limit on tax breaks for $20,000 investments had prompted many farmers to bring forward spending decisions almost immediately.

However, while the three different depreciation categories all provided opportunities to significantly upgrade technology, a lot of farm shopping lists were less sophisticated, with new water tanks, second hand utes and fencing materials popular inclusions in 2014-15 tax declarations.

Mr Elliott said bigger investments qualifying for uncapped primary production tax concessions were generally taking more time to plan, and in the case of new fodder storage sheds or grain silos, could typically require outlays of $100,000 or more.