Whilst there are no specific incentives for Agribusiness, many of the proposed changes will impact this sector including:
- The changes for eligibility for access to the Small Business concessions;
- Reduction in the company tax rate for those carrying on business;
- The stretching of the 32.5% tax rate band to $87,000; and
- Changes to Superannuation, which will throw many plans into disarray.
The main winners are likely to be:
- Those agribusinesses, incorporated or unincorporated that currently have a turnover in excess of $2m but less than $10m will be able to access lower tax rates or offsets as well as small business concessions, in particular the immediate deduction of depreciable assets costing less than $20,000;
- Those earning currently between $80,000 and $87,000; and
- Companies carrying on business with the reduction in the company tax rate.
The main losers are likely to be:
- Superannuants and the confidence in the superannuation system.
- Dividend recipients as the franking credit available will reduce.
- Those with large or small superannuation account balances.
Mike is a partner in a farming partnership in a marginal area. Historically the farm has fluctuating income years.
In the good year the averaging provision will likely be of greater benefit with the lifting of the 32.5% tax band to $87,000.
He has been unable to make any concessional contributions to superannuation for the 2018, 2019, 2020 and 2021 years. In 2022 he has a good year and can use the carry forward unused concessional carry forward amounts of $100,000 (4 years) plus a current year amount of $25,000 allowing him to contribute $125,000 reducing his tax exposure. Currently he could only make a contribution of up to $35,000.
Wine Equalisation Tax
The eligibility for the wine equalisation tax (WET) rebate, which is currently worth up to $500,000 per claimant, will be tightened up, and the amount available to producers will be limited to $350,000 from 1 July 2017 and $290,000 from 1 July 2019. There will also be a crackdown on companies making multiple claims, and much stricter definitions as to what constitutes a winery or a producer. Under the tightened eligibility criteria for the rebate, a wine producer must own a winery or have a long-term lease over a winery and sell packaged, branded wine domestically.
The move is predicted to benefit small producers further. Under current rules, any producer who has less than $1.7 million in wholesale sales either pays no WET, or receives a net payment from the rebate – so small producers benefit most, as a proportion of sales.
The original intention of the rebate when it was introduced in 2004 was to assist small wine producers in rural Australia and to boost regional tourism, and the changes in the budget will aim to restore that intent.
The move has been welcomed by the Winemakers Federation of Australia and Wine Grape Growers Australia, who have been lobbying hard to scale back the rebate to restore “integrity” into the sector.
The two bodies had lodged a joint submission claiming the WET rebate was holding up changes necessary within the industry, and allowing “uncommercial” grapes to be used for bulk wine and sold off cheaply. They also accused the bulk wine sector of exploiting the rebate system, and “impoverishing wine grape growers” and diminishing the ability of winemakers to add value to their brands