Agriculture Newsletter 8 May 2020
Drought Recovery Fund
A new $500,000 fund will help farmers and growers prepare their businesses to recover from drought as the economy gets moving again, Agriculture Minister Damien O’Connor has announced.
The 2020 Drought Recovery Advice Fund is to help farmers recover from the 2020 drought, and plan for future droughts. It will pay for professional advice to a maximum of $5,000 (excluding GST). The fund is capped at $500,000 (excluding GST). This is a limited fund so applications needed to be made as soon as possible.
Successful applicants can decide what type of drought-related advice they need. They can choose a supplier either from the pre-approved list or find their own. Gilmore Taylor Associates Limited is an approved supplier so are ready to provide these services.
To be eligible for this fund:
- the farm must be in a 2020 drought-affected region or district
- the farming business must have been negatively affected by the 2020 drought
- at least 50% of the farmer’s income, in a normal year, must be earned from the farming business.
The 2020 Drought Recovery Advice Fund can help farmers get a wide range of drought-related business and technical advice. The advice can include (but is not limited to):
- stock water best practice
- feed management systems
- strategic planning, including farm business and whole farm plans
- land management and sustainable management techniques
- analysis of farm systems
- risk and recovery management
- business continuity
- modelling farm systems change scenarios
- alternate land-use options
- technical advice on soil, pastures, or animal production
- financial planning and decision support
- farm accounts analysis.
Applications open 9 am 11 May 2020 and farmers are required to submit an application to firstname.lastname@example.org by 5pm on 12 June. On 22 June, successful applicants will be given instructions on how to proceed with their preferred supplier.
Successful applicants need to receive their drought-related recovery advice by the end of the financial year (June 2021).
If you are successful, MPI will pay for recovery advisory services of up to a maximum of $5,000 (GST excluded). Any costs incurred over the approved amount will be at your own expense.
Commercial and Industrial Buildings Depreciation
From the 2020-2021 income year onwards depreciation for commercial and industrial building is able to be claimed again. Previously, tax depreciation on all buildings was at 0% because of 2011 tax changes.
This change applies to all non-residential buildings. The applicable depreciation rates introduced are 2% DV and 1.5% SL. It applies to all applicable buildings owned at the beginning of the 2020/2021 tax year and all buildings acquired and capital improvements made to existing buildings after that date.
Low-Value Asset Write-Off Threshold
There has been a temporary increase to the low-value asset threshold for depreciation from $500 to $5,000. This will allow you to deduct the full cost of your business assets with a value of less than $5,000 in the year they were purchased. This is applicable to assets acquired between 17 March 2020 and 17 March 2021.
For assets purchased on or after 17 March 2021, this threshold will be permanently increased from $500 to $1,000.
Loss carry back
Taxpayers with losses will be entitled to a refund of prior year tax paid. By carrying back a loss, the taxpayer will not be able to use that loss to offset any future tax.
The loss carry back can be based on filed returns or estimates. If an estimate of the loss is made, use of money interest will apply from the first provisional tax instalment for any shortfalls in that estimate year. The safe harbour rules for using the standard uplift basis for calculating provisional tax will not protect taxpayers from interest.
The losses are only able to be carried back to the immediately preceding year – so 2021 losses can be carried back to 2020 and 2020 losses can be carried back to 2019.
Using the regime is not entirely without risk especially, if as is likely to be most useful, estimates of losses are used to request refunds. If the estimate is excessive, use of money interest applies. This risk may be managed by making a number of estimates through the 2021 year as the position becomes clearer.
The complexities of the provisional tax payment rules also need to be considered so future year tax underpayments do not attract interest.
Finally, as these rules are brand new and can be complex, particularly where there are multiple taxpayers involved, care needs to be taken. This is not a case of claim now and deal with the consequences later.