Primary Producers 2024
What is Primary Production?
- Defined under s.995-1(1) as a business involving:
- Cultivating plants, fungi, or their produce.
- Maintaining animals for sale or their bodily produce.
- Fishing and forest operations.
- Manufacturing dairy produce from raw materials produced by the taxpayer.
Primary Production Income
Primary production income includes proceeds from the sale of produce, livestock, stud fees, prize money, insurance recoveries, agistment fees, and primary produce taken for domestic use.
Averaging of Income
- Due to seasonal factors, primary producers often face income fluctuations. Averaging provisions allow income and tax payable to be spread over a maximum of five years.
- Eligibility includes individuals, partners, or trustees engaged in primary production for at least two years.
- Averaging involves granting a tax offset when taxable income exceeds average income or imposing extra tax when taxable income is less than average income.
Special Deductions
A number of deductions are available to primary producers for capital costs:
- Telephone Lines: Deduction over ten equal annual instalments for extending telephone lines.
- Water Facilities and Fencing: Immediate deduction (100%) for water facilities and fencing expenditure.
- Landcare Operations: 100% deduction for capital costs on landcare operations (e.g., soil conservation, pest eradication, and weed destruction).
- Fodder Storage: Deductible over three years for eligible fodder storage assets like silos and hay sheds.
Farm Management Deposits Scheme (FMD)
- Allows primary producers to reduce tax effects caused by fluctuating incomes by making deposits that are tax-deductible.
- Deposits cannot exceed $800,000, and withdrawals are assessable in the year of withdrawal.
Horticultural Plants
- Depreciation deductions are available for acquiring and planting horticultural plants. The write-off rate depends on the effective life of the plants, ranging from 7% to 40%.
Livestock Valuation
- The closing value of livestock is determined using cost, market selling value, or replacement price.
- Natural increases in livestock are assigned a value when first brought to account.
Profit from Death or Forced Disposal
- When livestock is disposed of due to events like compulsory acquisition or natural disasters, the profit is assessable income.
- Taxpayers may elect to either spread the profit over five years or defer it by offsetting the cost of replacement stock.
Insurance Recoveries
- Insurance recoveries for loss of livestock or timber due to disasters may be spread over five years.