As we are all aware, devastating bushfires have been burning across large parts of Australia.
If you have a primary production business and have been impacted by these bushfires you may be eligible for the following tax concessions.
Forced Disposal or Death of Livestock
If you have lost livestock due to a fire, including being forced to dispose of livestock because of pasture or fodder being destroyed by fire, any profit made from insurance or forced sale can either be:
spread over a period of five years,
Deferred and used to lower the cost of replacing livestock in the disposal year or any of the next five income years.
If you defer the profit, any unused amounts will be counted as assessable income in the fifth income year.
Losing Your Eligibility
Please note that you may become ineligible to spread income over a period of years if you:
become bankrupt, insolvent or die,
depart from Australia permanently , and
cease to carry on the primary production business the election relates to.
Any insurance payments received are treated as assessable income, if the insurance premiums paid have been claimed as a tax deduction. Any insurance payments that is to replace lost income will be assessable in the year they were received, subject to deferral rule above.
Insurance payments made to replace property, plant and equipment are treated as capital proceeds made on the disposal of the destroyed assets. There is a 'roll-over relief' available when the capital proceeds exceed the value of the destroyed asset. This allows for the profit to be offset against the cost of the replacement asset, rather than being declared as income. If the replacement asset is not purchased by the end of the following financial year, then the profit will be declared as assessable income. For the roll-over relief to apply, the following conditions must be met:
The asset was not part of a 'Small Business Depreciation Pool' or 'Low Value Pool', and
The replacement asset must be used wholly for business.
Disaster Relief Payments
If you have received any disaster relief payments from the government, charity, employer or another source as a one-off, this is likely to be tax-free. Any purchases that are business related will be deductible as normal. The common types of relief payments are:
Australian Government Disaster Recovery Payments (DRP).
Disaster Recovery Allowance (DRA).
Payments under the Natural Disaster Relief and Recovery Arrangements (NDRRA) other ex-gratia relief payments.
Early Farm Management Deposits (FMD) Withdrawals
If you have received a recovery grant through the NDRRA as a result of the bushfires, you will be able to withdraw an FMD amount within 12 months without losing your tax deduction. This is provided you made a deposit before the bushfires and the withdrawal happened after the recovery assistance was first provided. The withdrawal will be assessable in the year this is taken out. Any amounts put into an FMD later in the same year will not be deductible.
Extended Due Dates
The ATO has automatically granted lodgement and payment deferrals for areas affected by the bushfires. Monthly activity statements, all income tax, SMSF and FBT lodgements and payments for the affected postcodes, due 21 January and 21 February have been deferred to 28 May 2020.
You do not need to apply for this extension.
SA State Government Tax Relief
The SA Government has announced tax relief measures for people affected by the SA bushfires.
ex-gratia tax relief for stamp duty payable on the purchase of replacement properties. There will be relief of up to $48,830 in conveyance duty. For replacement homes valued above $1 million, duty relief will be capped at $48,830 with the balance of the duty payable.
ex-gratia tax relief for stamp duty payable on the purchase of motor vehicles. For purchase of a replacement vehicle valued below $50,000, there will be full relief of up to $1,940 for a passenger vehicle or $1,470 for a commercial vehicle.
ex-gratia land tax relief, including full relief on 2019/20 and 2020/21 land tax liabilities for properties destroyed or substantially damaged. Properties affected but not destroyed or substantially damaged will receive relief on 2020/21 land tax liability on a case-by-case basis. The usual land tax exemption for primary production land also applied, and
putting on hold debt collection of Emergency Services Levy debts.
Please contact one of our dedicated Agribusiness team member to discuss in more detail how we can help you.
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The information provided in this information sheet does not constitute advice. The information is of a general nature only and does not take into account your individual situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls SA before making any decision to discuss your particular requirements or circumstances.
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