National Farmers' Federation

NFF calls for reform to ‘broken’ tax system

The National Farmers Federation says Australia’s tax system is broken and is calling for sensible, forward-thinking reform to allow farm businesses to operate to their potential. The call comes on the back of a new report released yesterday, supported by the NFF, looking at the impact taxation policy has on Australian agriculture. The report titled ‘Tax in Agriculture’ is designed to prompt a discussion between the agricultural sector, policy developers and politicians on tax policy and appropriate reform. NFF Acting Chief Executive Officer Sarah McKinnon said farmers were subject to a ‘clunky’ and ‘complex’ tax system that was stifling their ability to grow. “Australia needs a tax system that is simple and helps businesses compete in a global marketplace. Every cent counts.” Ms McKinnon said it was vital that tax policy be tailored to help farmers achieve their businesses’ potential. “For example we support the Government’s plan to cut the company tax rate to 25% over 10 years and we urge them to go further. “The ‘Tax in Agriculture’ report suggests a single company tax rate of 22%. The NFF believes the Government needs to be more ambitious and pursue a figure even lower.” Ms McKinnon said multiple small business thresholds were confusing and counterproductive. “We need a single ATO definition of small business and a turnover threshold of higher than $2 million. “The NFF recommends the Government consider the $5 million threshold suggested in The Henry Review.” A scoping study and a taxation workshop held earlier this year shaped the authors’ paths of investigation. Ms McKinnon said specifically the research looked at what parts of the tax system best assisted farming businesses to achieve positive productivity and sustainability. “Importantly it also looks at where barriers to productivity exist and what role policy development could play in breaking down these obstacles.” Ms McKinnon said the Government had made some recent positive in-roads into tax reform to assist agriculture. For example the NFF supports the Government’s budget announcement to allow farmers to offset FMDs against farm debt interest charges. “However, FMDs are only available for individuals yet various forms of farm debt can be held by partnerships, companies or trusts. This is deterring banks from offering FMD offset facilities. If FMDs were available at the entity level, this valuable reform may actually be useful in practice.” The NFF is also advocating for the Government to retain the farm-specific accelerated depreciation measures relating to water improvements, fencing and fodder storage assets and the small business $20,000 instant asset write-off. “If these measures aren’t retained or replaced with a suitable alternative scheme, farm business confidence will be damaged,” Ms McKinnon said. A review of tax zone rebates and remote area fringe benefit tax concessions should also be pursued. “The current arrangements are outdated – we believe there are better ways of addressing regional disadvantage for example though investment in regional infrastructure and access at affordable prices,” Ms McKinnon said. “The NFF is open to discuss other options.” “We also believe farmers should be able to opt back into the primary production income averaging option after 10 years.” “The key message is for tax regulation to be most effective it must be developed with the industry it is endeavouring to assist, in mind,” Ms McKinnon said. NFF welcomes the ‘Tax in Agriculture’ report as a valuable contribution to public debate and will be referencing the report’s finding to pursue a comprehensive tax reform package that the farm sector needs to succeed and thrive in a challenging domestic and global economic environment. IN SUMMARY The NFF is seeking the following key tax reforms: * The cutting of the company tax rate to at least 22% – preferably lower. * A single ATO definition of small business to a turnover threshold of $5 million as suggested in The Henry Review. * Farm Management Deposits made available to entities not just individuals. * The preservation or suitable replacement of the accelerated asset depreciation scheme. * A review of tax zone rebates and remote area fringe benefit tax. The ‘Tax in Agriculture’ report was jointly funded by NFF, RIRDC, Dairy Australia, Australian Pork Limited, the National Farmers’ Federation, Australian Egg Corporation Limited, GrainGrowers and Meat and Livestock Australia. The Report can be downloaded at https://rirdc.infoservices.com.au/items/16-019

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