FARMERS have been exempted from new tax measures aimed at clamping down on benefits to corporate shareholders.
Assistant Treasurer Nick Sherry said the Federal Government had listened to concerns from farmers and small businesses that they would be inadvertently caught up in the new tax slug which was unveiled in this year’s May Budget.
The Government is moving to tax benefits accruing to shareholders who enjoy tax-free use of their company’s luxury assets such as boats, cars and holiday houses.
The National Farmers’ Federation hailed the decision as a major win after lobbying the Government strongly on behalf of farmers over the past few months.
“The announcement today by Senator Sherry takes up all the points we put to the Government on how the changes would adversely, and unnecessarily, affect farmers,” NFF President David Crombie said.
“As of today, farmers will not be entangled by the new legislation and will be able to go about their legitimate use of company assets, which are owned exclusively for business use … in particular, farm land.
“The NFF raised key concerns that a loophole in the legislation would inadvertently entrap bona-fide primary production business assets, when the policy intent was clearly aimed at the tax-free use of luxury company assets.
“Farm assets used in the normal course of farming, such as land, clearly do not fall under the intended category and today’s announcement quite rightly excludes them.
“In addition, the Government has also committed to the NFF’s call for a ‘residence exemption’, ensuring that farmers will not be required to pay rent to themselves for use of the farm homestead.
“Without these changes, as pointed out in the NFF’s submission to the Government, it would have been catastrophic for many of Australia’s 140,000 farmers, requiring them go through an unnecessary, complex, costly and time consuming ordeal to dramatically change farm business structures to avoid major cash flow issues.
“Today’s changes are a victory for commonsense, as well as Australian farmers. The Government is to be commended for the timely and considered approach it has taken to dealing with the issues we have put to it and in dealing with the issues so comprehensively.”
Announcing the decision, Senator Sherry said the Budget changes to non-commercial loan rules would improve the fairness and integrity of the tax laws, putting shareholders on the same level as employees who must pay fringe benefits tax.
But during a period of public consultation on the measure, the Government had received submissions from genuine farming businesses and small businesses which used a residence as part of the business that they would be “unintentionally impacted”, he said.
Two changes to the new rules had therefore been made, Senator Sherry said.
Any business asset provided under a “right to use” or license arrangement, such as farm land owned by a farmer’s private company, would not be covered by the new rule, meaning there would be no tax liability for any “imputed” rent or other benefit.
And any residence used as an integral part of the business and in which business operators live, such as a farm house, will also be disregarded.
The “carve outs” would have no impact on projected revenue and would improve the targeting of the measure, Senator Sherry said.
