The Federal Government has announced it will bring forward tax depreciation measures for primary producers announced in this year’s Federal Budget.
The move opens the door for farmers and other primary production businesses to claim accelerated depreciation on fencing, water facilities and fodder storage in their 2015 tax returns, rather than having to wait until the 2016-17 financial year as originally scheduled by the Government.
Under the new measures, primary producers can fully deduct the cost of water facilities and fencing in the year they are purchased and deduct the cost of fodder storage assets over three years. Importantly, these measures are available to all farmers, not just those who are classified as a small business.
Previously, the effective life was 30 years on fencing, three years on water facilities and up to 50 years on fodder storage assets.
Eligible capital expenditure includes dams, tanks, bores, irrigation, channels, pumps, water towers, windmills, silos and fencing.
Although the new tax measures are generous, producers are reminded that they should only purchase equipment eligible for the deduction if they are needed by the business, and not simply because the deductions are available.
With draft legislation now released, it will not be necessary for the new fencing, water facilities or fodder storage assets to be installed and ready for use by 30 June 2015 to be eligible for the new rate of deduction. Rather, it is expenditure that is incurred, or committed to, by 30 June 2015 that will be eligible.
The draft legislation also places an exclusion on some fencing assets – stockyards and pens, or portable fences – from being eligible for the new depreciation regime.
If you would like to discuss the new measures further, please contact your William Buck agribusiness advisor on (08) 8409 4333.