As a farmer or farming contractor there are a number of expenses you incur throughout the financial year.
Many of these are minor costs that build up gradually, and it’s important to keep track of these so that you can claim back on them come tax time.
Twomeys principal certified accountant David Hodge is based in Wagga Wagga, New South Wales and has a large number of farming and agribusiness clients.
Hodge spoke exclusively to TradeFarmMachinery.com.au and has shared a number of helpful tips for farmers and agribusiness managers regarding their tax.
1. KNOW WHAT YOU CAN CLAIM
When it comes to your business tax, it’s all about minimising the impact of taxation payments on the cash flow of your business.
Hodge says he is surprised by how many farmers do not know what they are able to claim as a business expense. If you run a sheep farm, for instance, you can claim dog food as a business expense if you have working dogs, even if you have purchased it in with your groceries.
The same goes for vet bills. If you just thought of the animals as pets rather than a vital business expense, think again.
2. USE THE $20,000 ASSET REBATE
This allows for the immediate write-off of business assets purchased up to $20,000, which Hodge says will help those farmers adopting the pooling system for depreciation.
There is no guarantee that this will remain in place in the years ahead, however, so Hodge says farmers should make the most of it while they can. It could be time to get that new ATV?
3. EMBRACE ACCOUNTING TECHNOLOGY
Everyone is pretty good these days keeping up with the GST requirement of up-to-date records every three months, even small scale farmers, according to Hodge.
Also many farmers are moving away from the paper-based ‘shoebox method’ of keeping receipts and using cloud-based systems such as Concur to keep track of their business expenses, allowing easier and quicker record keeping.
4. SEEK ADVICE IF LOOKING TO DIVERSIFY
“If I had one piece of advice to give farm and agribusiness owners, it would be to put the appropriate time and effort into cash flow planning, and to seek an accountant’s advice before acting on major decisions,” Hodge says.
Changing your business strategy, making a major infrastructure investment or purchasing other businesses can have major tax implications that may make you think twice.
5. DON’T TRY TO OVERCLAIM
There can be confusion over what can be claimed as a business expense because, for farmers especially, household expenses can easily get mixed in with business costs.
“The only real areas that I think need to be watched are in relation to private use of motor vehicles, plus farmers need to determine appropriate levels of deductions for home expenses, electricity and the like,” Hodge says.
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