THE National Farmers' Federation is launching a last ditch campaign to
change parts of the Federal Government's new Simplified Tax System (STS), claiming it will cause tax nightmares for bigger farmers.
The STS Bill, which is set for debate in parliament today (Thursday), has an eligibility threshold of $1 million, leaving farmers with a turnover of
greater than $1 million with a much greater tax burden, NFF taxation
director Su (correct spelling - Su) McCluskey said.
Of particular concern for those farmers ineligible for the STS, is their
inability to claim the equivalent of accelerated depreciation.
Instead the non-STS farmers will have to claim depreciation over the
effective life of their asset.
So instead of claiming 30 per cent depreciation on a tractor, if it is
expected to last 10 years they may only be able to claim 10pc depreciation under the new uniform capital allowances regime.
In addition, businesses which enter the STS will be able to write-off the
full amount of purchases under $1000, while those who don't qualify must
determine whether every purchase is a depreciable asset and either place it on an asset register or allocate it to a low value pool and claim
The $300 that was previously available as a full write-off has been removed, which means farmers need to consider the treatment of everything from screwdrivers to drench guns.
To reduce these problems, the NFF is asking for the STS threshold to be
changed to a net asset value of $5m with no turnover threshold, but will
probably accept a $2 million turnover threshold, which the government has
set as a benchmark for simplified Business Activity Statement eligibility.
Former Grains Council president and now Federal Small Business minister Ian Macfarlane said it would be extremely difficult for the NFF to achieve change at such a late stage.
Plus, farmers had been major beneficiaries of a number of tax system changes, he said, such as twice yearly Pay-As-You-Go periods and savings on fuel.
"I'm prepared to listen but it is going to be difficult to change it," he said.
The Government has continually argued that almost every farmer would qualify for the $1m turnover threshold. According to Australian
Taxation Office Statistics, 99 per cent of farmers will qualify for the STS.
However, Ms McCluskey said the tax statistics were misleading as they relied on individual taxation data. Due to the grouping rules the NFF believes that a much lower number of farmers will be eligible, she said.
The NFF is also concerned about the lack of awareness of the non-commercial losses legislation introduced last year.
If a farmer earns $40,000 or more off-farm, it will not be able to claim a
tax loss if it does not meet one of five strict eligibility criteria when it
lodges this year's tax return.
While the legislation was designed to prevent rich city-dwellers from using farms to reduce their tax bill, Ms McCluskey said farmers who worked as shearers, had spouses who earned off-farm income or simply had income earning investments could be caught-up in the net.
"A lot of people who are on small farms with off-farm income are going to
get caught," she said.
"Their farm will have made a loss, and they are going to find they can't