This year's budget has a big focus on cutting red tape for farmers looking to export, carbon farming and biosecurity.
Tax concessional treatment for Australian Carbon Credit Units (ACCUs) and Biodiversity Certificates
From 1 July 2022, the Government will allow proceeds from the sale of ACCUs and biodiversity certificates generated from on-farm activities to be treated as primary production income. As a result, eligible primary producers can defer the taxing point until realisation of an ACCU, allow access to income tax averaging arrangements for ACCU income and access to the Farm Management Deposits (FMD) scheme.
Currently, farmers who sell ACCUs cannot treat the income as primary production income and therefore are ineligible for concessional tax treatment under the FMD scheme or tax averaging. ACCU holders are currently taxed based on changes in the value of their ACCUs each year, which can result in tax liabilities prior to sale.
This common-sense change is positive for farmers. However, it could hinder foreign capital that may support farmers with the capital required to derive ACCUs. For example, primary production income is expressly excluded from the managed investment trust regime, driving down the economic attraction of Australia for such investments.
This change is still encouraging for primary producers in regional and remote areas to undertake additional carbon abatement and biodiversity stewardship activities, and we expect greater focus on this sector given the Government’s pledge to reach net zero by 2050.
Patent box tax concession extended to agricultural innovations
In welcomed news to incentivise and support commercialisation of innovation, agricultural innovations and low emissions technology will be added to the patent box tax concession and are intended to apply for income years starting on or after 1 July 2023.
To the extent that the research and development was undertaken in Australia, eligible corporate income derived from certain Plant Breeder's Rights, patents on agricultural and veterinary chemical products and low emissions technologies granted or issued after 29 March 2022 may also be subject to the effective income tax rate of 17%.
Boosting support for agricultural exports in international markets
Australian businesses will receive a backing to improve competitiveness in international markets with the Budget providing $267.1 million to modernise Australia's trade export system.
Agricultural exporters will benefit from:
- $80 million provided to support small and medium export businesses re-establish their presence in overseas markets through the Export Market Development Grants program;
- $127.4 million will be invested to expand the Digital Services to Take Farmers to Market initiative to transform delivery of Government agricultural export systems; and
- $27.4 million has been committed to promote agribusiness and large trade events.
Regional spending to advance and develop regional infrastructure
In addition to various flood relief packages, the Government has earmarked material amounts in the budget for regional spending to advance and develop a number regional infrastructure projects particularly focussed on transformational water and telecommunication projects and improving supply chains, which should ultimately have significant consequential flow on effects for primary producers and agribusinesses.
The budget spending includes $20.1 million on the reforms to livestock traceability to strengthening on-farm biosecurity and mitigate against threats. A big win for primary producers who will be able to access three grant rounds to support activities that improve on-ground biosecurity and/or traceability infrastructure systems.
The Government also announced they will provide $7.1 billion over 11 years from 2022-23 to support the continued development of four key regional hubs across Australia targeted at strategic infrastructure projects that drive economic and jobs growth in existing and emerging industries.
Two of these hubs are expected to directly assist agribusinesses:
- one hub located in North and Central Queensland with investment in water infrastructure and supply chain projects that promote water security to open up agriculture and industry growth opportunities; and
- the second hub located in the Hunter region in New South Wales to fund transport infrastructure projects that will improve supply chain efficiencies and help diversify the economy, building on the region’s existing strengths and facilitating the development of new industries.
In addition, a summary of some of other budgeted spending and projects which should have some direct or indirect impact on Australian agribusinesses includes:
1. Agriculture: continuing to deliver Agriculture 2030
The Government will provide a further $135.6 million over 5 years from 2021-22 to support the agricultural sector’s ambition of a $100 billion industry by 2030 through strengthening biosecurity arrangements and agriculture communities. Funding includes:
- $61.6 million over 4 years from 2022-23 to improve biosecurity capabilities, infrastructure and risk management activities across Northern Australia including addressing the potential threat of lumpy skin disease; and
- $20.0 million over 4 years from 2021-22 to work with states and territories to reduce the impact of pests and weeds on agricultural production, native wildlife, the environment, and the community.
2. National Water Grid Fund: project funding
The Government will provide $6.9 billion from 2021-22 to expand the investment in nationally significant, transformational water infrastructure projects to assist in developing regional communities. Funding includes:
- $5.4 billion for Hells Gates Dam, Queensland;
- $600m for Paradise Dam Improvement, Queensland;
- $433m for Dungowan Dam and Pipeline, New South Wales;
- $300.6m for the Darwin Region Water Supply Infrastructure Program – Stage 1, Northern Territory;
- $126.5m for Emu Swamp Dam and Pipeline, Queensland; and
- $13.7m for the Don Irrigation Scheme, Tasmania.
3. Government Response to 2021 Regional Telecommunications Review
The Government will provide $1.3 billion over 6 years from 2021-22 to improve regional telecommunications, including through providing greater mobile coverage and targeted solutions to address issues such as mobile congestion, as part of the Government’s response to the 2021 Regional Telecommunications Review. Funding includes:
- $811.8 million over 5 years from 2022-23 to the Department of Infrastructure, Transport, Regional Development and Communications to expand mobile coverage, connectivity, resilience and affordability in regional Australia, building on existing programs including the Mobile Black Spot Program and the Regional Connectivity Program;
- $480.0 million for NBN Co to upgrade its fixed wireless and satellite networks to improve services in regional, remote and peri-urban Australia; and
- $1.8 million in 2022-23 to the Australian Competition and Consumer Commission to conduct a review of mobile tower access fees.
Simplifying foreign investment framework
The Government will amend Australia's foreign investment framework to reduce the regulatory burden faced by foreign investors. The amendments will streamline the requirement for some foreign investors to notify the Government before acquiring an interest, while still maintaining the Government’s ability to address national interest concerns as they arise. These amendments are due to commence on 1 April 2022 and will be well received by foreign investors given the delay in turnaround times for approval request.
Disclaimer: This content provides general information only, current at the time of production. Any advice in it has been prepared without taking into account your personal circumstances. You should seek professional advice before acting on any material.