With the 2012/13 tax year recently ended, many of us will soon be looking to meet with our Accountants, keen to maximise our tax deductions. For farmers in particular, there are many potential deductions to consider. Based on Moore Stephens' vast experience with tax management for farming businesses, here is a collection of key opportunities for increasing your tax cheque this year.

Crops

The cost of planting annual crops is deductible under the general deduction provisions in the income year in which the expenditure is incurred. On the other hand, expenditure on planting trees, shrubs and similar long-lived plants is generally capital and non-deductible. A special write-off is available for capital expenditure incurred in establishing horticultural plants, including grapevines.

What this means to you:
You will need to have recorded expenditure on annual crops separately from expenditure on other long-lived plants to ensure the correct write off is received.

Buildings

Non-residential buildings used in the primary production, forestry and pearling industries are treated as depreciating assets as are employee amenities (e.g. sanitary ware etc. forming part of toilet accommodation or washing facilities). Improvements to or fixtures on land, whether removable or not, are treated as assets separate from the land.

What this means to you:
Buildings will need to have been correctly classified to received the correct write off.

Trading Stock

As with other taxpayers, primary producers are not entitled to a deduction for the cost of trading stock until the stock is on hand.

What this means to you:
Higher stock levels may mean higher income. Stock should be properly recorded/counted, including records of births, deaths, and provisions to ensure the correct income is calculated.

Conservation Convenants

There is a special deduction for entering into a permanent conservation covenant over land with certain deductible gift recipients.

What this means to you:
A conservation covenant is an agreement made with certain deductible gift recipients that aims to protect and enhance certain land. There are tax concessions available depending on the type of arrangement, and whether any payment is received. Complete details of any covenants should be provided to your accountant to ensure you receive your full deductions.

Losses

Primary production losses may be carried forward indefinitely. The measures that prevent a loss from non-commercial business activities being offset against other assessable income in the year in which the loss is incurred do not apply to an individual carrying on a primary production business if the income from other sources is less than $40,000.

What this means to you:
There can be restrictions on the claiming of prior year losses unless certain tests can be passed. Ensure you discuss your situation with your accountant to ensure all tests have been considered.

Conservation Tillage Offset

A 15% refundable tax offset is available for the cost of machinery used in conservation tillage farming activities (eg those involving sowing crops in ways that minimise soil disturbance). The offset is available for assets that are first used or installed ready for use in a primary production business in the period between 1 July 2012 and 30 June 2015.

What this means to you:
Conservation Tillage seeders sow seeds and fertiliser into untilled soil during a single pass, thus reducing soil disturbance and resulting in fewer carbon emissions. If you have undertaken this type of work, you will need to provide full details to receive the tax offset.

Bushfires and Other Natural Disasters

The Commissioner has issued two fact sheets ( Disasters and primary producers — farm management deposits scheme and Bushfires and small business owners) dealing with the concessions available for primary producers and small business owners affected by bushfires.

What this means to you:
If you have been affected by a natural disaster, additional information may be found on the ATO website or speak to your accountant.

This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2011 Moore Stephens Australia Pty Limited. All rights reserved.