Opteon

Agribusiness & rural property valuation & advice

Opteon’s team of agribusiness and rural property valuers provide valuation and consultancy advice for a diverse range of rural and regional property assets. Our team have experience in agriculture and understand land management practices. This knowledge extends to expert property advice on all types and scale of rural property including dryland cropping, grazing, irrigation, water licenses and other specialised assets. This includes a wide range of intensive livestock and horticultural properties for broad-acre cropping, grazing, dairy and a wide range of intensive agriculture and horticultural properties for major corporate clients and lending institutions. To visit Opteon’s website >> click here.

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Our certified & experienced agribusiness & rural property valuers & advisors are located across all major metropolitan & regional centres. To request a valuation quote please >> click here.

Contact Opteon

Telephone: 1300 40 50 60

Melbourne
Ground Floor
737 Bourke Street
Docklands VIC 3008
Australia

Tax tips for agribusinesses and rural properties in 2021

Did you know you can claim immediate deductions for water facilities, such as dams, bores, windmills, fencing, hay sheds and even items like grain storage bins?

Many farmers and agribusiness owners may be missing out on the full benefits of asset depreciation deductions due to lack of awareness of the rules. Here is an overview of the rules regarding primary production assets, and the benefits of a tax depreciation schedule for agribusiness properties.

Depreciating primary production assets: what the ATO says

Depreciation deductions for most assets (e.g. buildings and equipment) can be claimed over several years under the general rules, based on the asset’s decline in value. However, there are special rules that apply to certain types of primary production assets where you may be able to claim an immediate deduction for depreciation. This includes:

• Water facilities – this category includes dams, tanks and tank stands, bores, wells, irrigation channels, pumps, pipes, water towers and windmills. Agricultural business owners have been able to claim immediate deductions for these assets from May 1, 2015. The rules apply whether the primary producer leases or owns the land.
• Fencing assets – the same rules apply for fencing assets as water facilities. The rules also cover the cost of repairs to fences, and all components and parts used in their construction.
• Fodder storage – this includes silos, liquid feed tanks, hay sheds, grain bins, grain sheds and bunkers for silage. For these assets, you can claim a deduction for the full cost where you incurred the expense on or after August 19, 2018, or if the asset was installed and ready for use on or after that date. In the case of assets installed between May 12, 2015 and August 19, 2018, deductions can be claimed over a period of three years.

What about second-hand assets?

This information applies to new assets. For second-hand assets, you can claim depreciation deductions under the same rules, but only if the previous owners have not already done so. Some farmers may be eligible to claim under the instant asset write-off rules for second-hand assets as a small or medium business enterprise.

Instant asset write-offs

Aside from the above situations for water facilities, fences and fodder storage, some businesses may be eligible for instant asset write-offs for the business portion of an asset’s cost.
Instant asset write-off can be used for multiple assets and some second-hand assets, providing the cost of each is lower than the threshold. The threshold was recently increased from $30,000 to $150,000 and applies to the end of June 2022. To meet the criteria, the asset must have been purchased by December 31, 2020. It must have been first used, or installed ready for use, between March 12, 2020 and June 30, 2021.
Businesses with a turnover of up to $5 billion (previously $500 million) may be eligible, although a $500 million turnover limit applies for second-hand assets.

Benefits of a tax depreciation schedule for agribusiness properties

Agribusiness owners often tend to focus on profitability and don’t take full advantage of available depreciation deductions. However, these deductions can substantially reduce a business’s taxable income.
The tax savings can in turn be used to improve cash flow, invest in new plant, equipment or systems, or to create a safety net to tide the business over during difficult seasons.

Some real-life case examples

We’ve dealt with many cases where agribusiness owners were able to make substantial claims through primary production asset depreciation. Here are some examples:

• Sheep farm purchased for $1.85 million in 2021 – the owner was able to claim 20% (more than $370,000) in the first financial year of operation. Approximately one-third of this came from dams, while 17% came from shearing sheds and 16% from fences.
• Cotton farm purchased for over $7 million during 2019 – the buyer claimed over $480,000 (just under 7%) in depreciation deductions during the first financial year. 71% of this came from a mix of assets, including bores (30%), agricultural sheds (15%), irrigation channels (14%) and dams (12%).
• Hobby farm purchased for $1.6 million in 2020 – the business owner was able to deduct 5% (approximately $85,000) in the first year. Approximately 70% of this resulted from cattle yards (22%), electric and non-electric fencing (29%), dams (10%) and agricultural sheds (9%).

Get in touch for more information

As you can see, the rules regarding primary production depreciation are detailed and complex, and this guide certainly doesn’t cover every situation or opportunity!

At Opteon, we can help you minimise your tax bill for your rural business by preparing a tax depreciation schedule. Our tax depreciation services are risk free. This means that if after an initial review, we determine that the deductions available for your property will not cover Opteon’s fee, we will recommend that you do not proceed.

For more information on the benefits of a tax depreciation schedule for agribusiness properties, contact us via our request a quote page, or on 1800 40 50 60.

Meta description: Many farm business owners are not aware of the benefits of a tax depreciation schedule for agribusiness properties. Opteon explains how this works.
Sources:
https://www.ato.gov.au/Business/Primary-producers/Livestock-and-other-assets/Depreciating-assets/#
https://www.ato.gov.au/Forms/Guide-to-depreciating-assets-2020/?page=16#
https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Simpler-depreciation-for-small-business/Instant-asset-write-off/#
https://www.ato.gov.au/business/depreciation-and-capital-expenses-and-allowances/#