Ag investment write-offs stir instant spending rush in bush
What started out a decade ago as a modest tax incentive to buy a few power tools or a farm computer has ballooned into some serious spending options this year as the federal government urges small businesses to go shopping.
Many farmers have rushed to take advantage of Canberra’s economic stimulus initiatives designed to get businesses investing and helping the economy ride out the costly coronavirus pandemic.
Instant tax depreciation opportunities which allowed small businesses to spend up to $1000 on equipment back in 2011 have now blown out to a spending limit of $150,000, if you buy before June 30.
Alternatively, farmers can opt to spend any amount before June 30 next year and claim a 50 percent instant depreciation write-off.
“We’ve seen a very strong response in the machinery industry, in fact some domestic equipment manufacturers and suppliers are having problems keeping up with orders,” said the chairman of southern Australian dealership group O’Connors, Richard Lewis.
“If you’re ready to spend up to $150,000 your choices now extend to some fairly worthwhile equipment – tillage implements, trailed sprayers or tractors up to about 160 horsepower (120 kilowatts),” he said.
“That’s triggered quite a few tractor sales into the horticulture, viticulture, dairy and grazing industries, as well as activity from contractors and tradies looking at skid steer loaders and tractors with front end buckets.”
Tax savings vary
The value of the instant deduction will depend on a farm business’ assessable income, the value of the eligible asset acquired and the farm’s relevant tax rate.
Although the machinery market was less active in regions hard hit by drought, particularly NSW, the temporary lift in the depreciation allowance ceiling would be particularly useful for those Victorian and South Australian grain growers who had enjoyed a good harvest and surging cereal prices in the past six months.
“They’ll be looking for any tax break they can get,” said Mr Lewis, who heads a Case-IH network with 10 dealerships spread from Bordertown in South Australia to north western Victoria and Grenfell in NSW.
Used gear sales lift
Demand for good second hand machinery had also jumped, spurred on by improved seasonal conditions across much of the eastern Australian grainbelt and the instant depreciation offer.