Ag White Paper heralds a better business environment for farmers
5 July 2015
Through the Agricultural Competitiveness White Paper, the Australian Government today released a series of measures designed to strengthen the contribution of agriculture to the national economy by providing a better business environment for farmers.
Minister for Agriculture, Barnaby Joyce, said the initiatives would play a critical role in developing a better business environment for agriculture by increasing farmgate returns, improving risk management and encouraging investment.
"With this White Paper, we are improving the tax system so that it recognises the business environment within which farmers operate and allows them to smooth out some of the bumps in their income and outlays," Minister Joyce said.
"The new initiatives include enhancing the successful Farm Management Deposits (FMD) Scheme, tax averaging and accelerated depreciation arrangements.
"These measures will work together to improve flexibility, investment and returns at the farmgate.
"For example, to help farmers better manage a variable income, the Australian Government is doubling the maximum deposit cap of the FMD Scheme to $800,000 from 1 July 2016," Minister Joyce said.
"This will give farmers more flexibility to manage changes in cash flow from year to year and set aside funds for low income years.
"In addition, we are lifting restrictions on FMD accounts so that banks—and I call on the banks to get on board when these changes are finalised—can offer FMD accounts that provide an offset on farm business loans. This will allow farmers to use FMDs to reduce the interest they pay on business debt and improve their net cash position.
"If all FMD holdings were to be used to offset loans, the benefit to the farm sector in interest savings could be up to $150 million a year."
Minister Joyce said that in addition to assisting farmers with income management, the tax system must support investment by farmers in critical farm infrastructure essential to improving the productivity of Australian agriculture.
"The White Paper consultation led to improvements to the accelerated depreciation regime for fencing, water facilities and fodder storage assets that were announced in this year's Budget."
Minister Joyce said the White Paper also provided farmers with greater flexibility in the management of taxed income by allowing primary producers to opt back into income tax averaging 10 years after they had elected to leave.
"During the past 40 years, the value of agricultural output has been almost two and a half times more volatile than the average for all other major sectors of the economy. Australian farmers also contend with greater volatility in yield and price than farmers in most other parts of the world.
"The tax system must account for this reality if we are to maximise the potential of our farmers and the returns that Australian agriculture delivers the nation.
"Through the tax white paper the Australian Government has started a national conversation about how the tax system can drive higher economic growth, living standards and improve our international competitiveness—agriculture will be central to that conversation.
"We have already removed the burden of the carbon tax, which unfairly taxed producers on a wide range of inputs, from fuel to fertilizer.
"And we have introduced the Growing Jobs and Small business package, benefiting the 97 per cent of Australian farms that have a turnover of less than $2 million.
"The Agricultural Competitiveness White Paper introduces practical tax measures that ensure farmers can thrive as they continue to deliver consistent returns to the national economy—year in, year out—despite seasonal variation at the farmgate."
The White Paper was informed by comprehensive stakeholder consultation—more than 1000 submissions were received and the government talked face-to-face with more than 1100 people across the country in developing this document. The White Paper is available at agwhitepaper.agriculture.gov.au.