Primary Producer
Many individuals, trust or companies may be involved in a business that deals with primary production. These are a primary producer engaged in plant or animal cultivation, fishing or pearling, tree farming, or felling operations and like all of us have to pay tax.
The taxable obligations of one involved in primary productions need to consider whether or not the activity is a business of primary production, outlined in the Australian Taxation Office’s Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production?
The following indicators will show that you are carrying on a business (under the ruling):
- That it is a significant commercial activity
- Purpose and intention of the taxpayer in engaging in the activity
- An intention to make a profit from the activity
- You are organising and carrying on your activity in a business-like manner and systematically.
- You are recording the transactions in a business-like manner.
- A business plan exists
- There are commercial sales of the product.
Primary Producer Tax – Your Obligations
Small Business Concessions
Your primary production business may be eligible for the small business concessions if it qualifies as a small business entity. Furthermore, Your eligibility will need to be reviewed every tax year, with all conditions satisfied that apply to particular concessions.
For example, if you are a primary producer and a small business entity, you can immediately deduct prepaid expenses if the aggregated turnover threshold is less than $50 million against your tax.
Simplified Depreciation Rules
You may be able to apply simplified depreciation rules to your depreciating assets when calculating deductions. These rules include:
- An instant asset write-off for assets that cost less than the relevant threshold
- A general small business pool for assets that cost the same or more than the relevant threshold. The pool has simplified calculations to work out the depreciation deduction.
If you choose to use simplified depreciation, the temporary full expensing rules with some modifications will apply. For instance, you cannot opt-out of the temporary full-expensing if you are applying the simplified depreciation rules.
Simplified Trading Stock
Small business entities only need to conduct stocktakes and account for changes in stock value in limited circumstances.
For example, oyster farmers must account for oysters on hand as trading stock (including oysters held on sticks or in trays or harvested and ready for sale). Subsequently, the farmers can choose to value their trading stock on hand at the end of the income year at cost, market selling value or the replacement value. They may also (if using the traditional stick farming method) use the ‘per stick’ farming method of valuation.
Time To Talk With A Tax Expert
Lastly, we can assist you with managing your additional tax considerations as a primary producer. Start a conversation with us today by calling (07) 3453 1848 or using the contact details below to find out more.
