Article by: Hari Yellina
Over the next 12 months, the farm sector’s need for new technology is set to grow even more. The federal budget proposed by Treasurer Josh Frydenberg includes a 120 percent tax break for all things digital, from improving farm internet to purchasing new mobile phones, GPS equipment, or remote flood control devices. Farms and other agribusinesses with yearly revenues of less than $50 million will be entitled to deduct expenses and depreciating assets related to increasing their digital technology use. The bonus deduction includes possibilities to modernize bookkeeping and invoicing software to cloud-based systems and ramp up the farm’s cyber security to effectively protect them from hackers and scams, up to a maximum annual investment of $100,000.
It also includes the cost of outside training to upskill employees. “The agricultural sector is highly aware of the benefits of investing in modern technology,” said Gerard O’Brien, an Albury-based director with the RSM Australia accountancy company. Farmers are prepared to spend money on equipment if it improves efficiency and output, especially if a $100 investment entitles them to a $120 tax benefit when they file their taxes. “If you’re paying $20,000 or more for new GPS equipment to increase the accuracy of a tractor or header, or adding automatic gates or water management systems, that’s a really excellent deal.”
Mr. O’Brien, who is also a farmer, believes that the existing reliability of digital network connectivity is the most significant constraint to the federal budget’s technology incentives in the bush. Canberra, on the other hand, was pledging $480 million to expand and strengthen the nbn network, as well as $812 million to increase rural mobile coverage and affordability. Megan Inverarity, a South Australian accountant, emphasised that a tax deduction of 120 percent would not translate to a simple government payout in the pocket of business owners. “If you spend $1000, you get a $1200 deduction based on your taxable income rate,” Ms Inverarity, a director at Murray Nankivell in Naracoorte, explained. “For someone paying a normal mid-range tax rate of 35%, that works out to a $420 tax savings.”
The federal government’s six-month reduction in the fuel excise levy, which reduces the cost of gasoline and diesel by 22 cents per litre, will provide a more immediate impact to farmers’ budgets. Despite the fact that the government reimburses the excise it collects on farm fuel, Mr O’Brien said producers were still responsible for the entire purchase price until their next quarterly tax return was submitted. “It makes quite a difference to your cash flow position if you don’t have to spend nearly as much in the first place,” he added, “particularly when we’re talking about a 10,000 gallon fuel delivery for $15,000 last month, and a lot more last week.” Loading up the ute in town will be significantly less expensive – at the very least.
“These days, paying less than $100 for a tank of gas is a fairly wonderful feeling.” According to Bruce Billson, the Australian Small Business Ombudsman, half the fuel excise would help to alleviate this significant input expense, particularly for the transport industry and the freight supply chain. The savings would take a few weeks to trickle down to service station stations, but the Australian Competition and Consumer Commission was already keeping an eye on how prices responded across the petroleum supply network. Ms Inverarity stated that the budget was obviously aimed at lowering rising living costs, with short-term solutions being a prominent element. “It wasn’t revolutionary, but I didn’t find myself cursing as much on budget night this year.”