WOOL and sheepmeat production could be boosted by a Federal Government decision to allow the immediate tax deduction of all capital expenditure on water facilities and fencing in the year of purchase.
WoolProducers Australia (WPA) has welcomed the announcement of the measure by Minister for Agriculture, Barnaby Joyce, and believe it will benefit sheep producers fighting wild dogs and drought conditions, or farmers wanting to boost wool and lamb production.
On May 27, the Federal Government announced that Australian farmers can now claim a tax deduction on all capital expenditure on water facilities, fodder storage assets and fencing incurred since the 2015 Budget was handed down at 7:30pm on May 12.
Further measures to support farmers who are preparing themselves for the damaging effects of drought are expected to be announced in the forthcoming Agricultural Competitiveness White Paper, expected to be released after final Cabinet approval around the end of the financial year.
WoolProducers sought accelerated depreciation
WoolProducers said it was announced in the 2015 Budget that the capital investment incentive would not be in place until the 2016/17 financial year. But WoolProducers president Richard Halliday said WPA gave a key piece of feedback to the Minister for Agriculture’s office – that it was vital that producers had access to accelerated depreciation and tax write-offs immediately.
“Knowing that the initiative was still over a year away there was concern that some primary producers would wait to invest in fencing, tanks, dams, feed silos, when the truth is many need to be able to make that investment now.”
Mr Halliday said WoolProducers felt the incentive would be particularly appreciated by New South Wales, South Australia, Queensland and West producers faced with wild dogs and drought conditions.
“It is opportune to give them the chance to make some infrastructure changes that if they get some rain in the future they can get back into the business of breeding and growing sheep.
“That’s one of our challenges, to make sure we rebuild the flock to a certain degree.”
Drought forcing NSW producers to destock
A NSWFarmers drought area survey recently found that more than 75 percent of respondents in western NSW had substantially or totally destocked their properties. More than 90pc of respondents in the area who usually plant crops had been unable to do so.
Mr Halliday said the tax announcement, coupled with additional drought measures announced in the budget, including the $25 million to assist producers reduce the impact of pest animals, will be welcomed by many farmers currently experiencing dry conditions.
“Some farmers are doing it tougher than others, for a lot of growers all they want is some decent rain but this goes a good way to allowing them to be better prepared and assist their businesses with important tools.”
Exclusion fencing needed to boost sheep numbers in wild dog areas
The two measures together could lead to producers building exclusion fences to get wild dogs under control, giving them the option of diversifying into sheep, lifting their sheep numbers or re-introducing sheep.
Mr Halliday said the potential for infrastructure investment in areas not affected by drought or wild dogs was “quite enormous,” including on farms that have not been able to afford to upgrade fencing.
“When a farmer can go and buy fencing material for a 100pc immediate tax deduction, you are going to see the potential for other people to pick up work for fencing or infrastructure improvement anyway.”
The incentive will help all livestock producers in all areas invest in infrastructure upgrades, he said.
“It’s a good call.”
“Feral pests are a massive issue as well as lack of rain in many parts of the country, being able to invest in fencing will be absolutely vital for many,” Mr Halliday said.
“We’re happy that Minister Joyce has considered this feedback and acted quickly as it allows people to invest now rather than waiting another 13 months to do so.”
Accelerated depreciation decision to cost $72 million
In a joint statement with Federal Treasurer Joe Hockey and Minister for Small Business Bruce Billson, Mr Joyce said the decision to bring forward the start date of accelerated depreciation for all farmers, regardless of the size of their farm, allowed them to prepare for drought and invest in the productivity of their farms immediately.
On Budget night it was announced that producers would be able to immediately claim accelerated depreciation on business assets costing up to $20,000. Farms with turnover of less than $2 million qualify as a small business and are therefore also eligible to immediately write-off all asset purchases up to $20,000.
The Federal Government said the measure build on our more than $333 million in targeted support for farmers and communities impacted by drought announced by the Prime Minister on May 9 in Longreach, Queensland, taking the Government’s total commitments to farmers in this year’s budget to more than $400 million.
“Supporting farmers in the hard times and boosting the competitiveness of the agriculture sector is not just good for the economy, it is also the right thing to do.
“Bringing forward these changes to begin from July 1 2016 to May 12 2015 is estimated to cost $72 million over the forward estimates,” the statement said.
For information on the new drought support measures go to www.agriculture.gov.au/drought
Sources: WoolProducers Australia, Department of Agriculture.
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