As Queensland and New South Wales are currently struggling through another drought in Australia, it is important for Farmers to be aware of the possible ways they can smooth out the profits over several years rather than having large tax liabilities in one year and then no profits for the next few.
One way this can be achieved is by deferring the profits from forced livestock sales over 5 years. Alternatively, the livestock sales can be used to offset the replacement stock. If the drought has not impacted your farm yet, one of the following options may allow This option can also be utilised in one of the following scenarios:
- If the farming land has been resumed by government
- The property is rented and being used by the government to eradicate cattle ticks
- The stock is required to be destroyed to control the spread of disease or has died because of a disease. Alternatively, if the property is declared contaminated by Australian law.
- If the farming land including the crops and fodder is destroyed by fire, drought or flood and you are intending to use the profits to acquire more livestock to build up the breeding stock.
However, farmers, whether they operate as a sole trader, partner in a partnership, trustee or beneficiary of a trust, are not eligible to make an election to move the profits to a future year if one of the following applies:
- Bankruptcy or insolvency
- Ceasing to be a primary producer
- Moving from Australia to another country
Should you want to look at options of ways to spread the profits from livestock sales please contact PJT.