Accelerated Depreciation for Primary Producers
Tax planning time is upon us once again and if you are a primary producer there are some very good tax deductions available to reduce that year end tax bill.
On the 12 May 2015, the ATO introduced amendments to allow primary producers to:
- Immediately deduct the cost of fencing and water facilities
- Depreciate over 3 years the cost of fodder storage assets
Under the previous arrangements, primary producers could claim a deduction for the decline in value of these assets as follows:
- Fences over a period up to 30 years
- Water facilities over 3 years
- Fodder storage assets over a period up to 50 years
What is classed as a water facility?
A water facility is a plant or structural improvement, that is primarily and principally for the purpose of conserving or conveying water, including alterations and capital repairs to plant or a structural improvement.
Water facilities include:
- Tanks and stands
- Bores and wells
- Irrigation channels or similar improvements
- Water towers
A structural improvement, alteration or capital repair to a structural improvement that is reasonably incidental to conserving or conveying water is also included such as:
- A culvert
- A fence to prevent livestock entering an irrigation channel
- A bridge over an irrigation channel
What is a fodder storage asset?
A fodder storage asset is plant, structural improvements, capital repairs or alterations to an asset that is primarily and principally used for the purpose of storing fodder.
For a fodder storage asset to satisfy the primarily and principally test, its main purpose must be to store fodder (other than some incidental or other minor purpose). For example a shed built to store hay would be a fodder storage asset. If the shed stored hay, and regularly stored tractors and other plant its main purpose would not be to store fodder.
Fodder storage assets include:
- Liquid feed supplement storage tanks
- Bins for storing dried grain
- Hay sheds
- Grain storage sheds
- Above-ground bunkers
The fodder being stored must be for animal consumption. For example a cotton farmer that purchases a silo which is used to store seed not intended for animal consumption would not be a fodder storage asset.
If you are a primary producer and a small business entity and incur a deduction for a fodder storage asset that is also under the $20,000 small business immediate write off threshold you can immediately deduct the cost in full rather than writing off over 3 years.
If you any questions or would like tailored advice specific to your situation, please do not hesitate to contact The Money Edge office on 070 4151 8898.
Kristy Pennell |Accountant | The Money Edge | Bundaberg