The farm sector is getting nervous next week’s pre-election Federal Budget may end up sacrificing sensible taxation reform for a hotchpotch of fiscal sweeteners and trinkets pitched at marginal seat voters.
In particular, the National Farmers Federation fears persistent talk about personal tax cuts by both sides of federal politics may actually lead to creeping tax increases or less coherent tax arrangements for producers, other small businesses and many individual taxpayers.
Against a backdrop of a burdensome government deficit of about $24 billion – Australia’s tenth consecutive annual deficit - Treasurer Scott Morrison hands down his third Budget next Tuesday.
Hot button themes on the farm sector’s watchlist include the instant tax write-off for small business equipment purchases worth up to $20,000, due to expire this financial year; a hoped-for lift in the threshold for small business capital gains tax concessions; possible changes to taxes on company franking credits, and the government’s commitment to spending on infrastructure to support farm productivity and exports.
“There’s been a lot of pre-budget talk of possible tax cuts for some, and news of government spending plans, but unfortunately we have not heard much about agriculture,” said NFF economics and trade general manager Scott Kompo-Harms.
“That is a bit of a concern, given the frequent spending references to projects planned for marginal Queensland electorates, and so on.”
It surprises me the talk has come back to spending more on tax cuts rather than doing more to attack the deficit
- Scott Kompo-Harms, NFF
Mr Kompo-Harms said despite the constraints of a significant national debt and the spending pressure already on the national ledger, both the Coalition government and Labor opposition seemed set on championing personal tax cuts to curry favour with voters before an election, due by early 2019.
“We’re worried the trend is, in reality, going in the opposite direction on taxation – we could be burdened with unintended consequences as tax priorities are shuffled about,” he said.
Labor opposed company tax cuts and wanted to prune the value of franking credits paid to shareholders, while the government had already tightened the qualification rules on capital gains concessions to small business and negative gearing on investment property.
It had also notionally targeted higher taxes for foreign investment in managed investment schemes, which the NFF fears may also entangle other agribusiness investors.
The water was getting muddied as both sides seemed headed down similar pre-election paths towards “minor personal tax cuts worth about as much as a sandwich and milkshake”.
What about the deficit?
“It surprises me the talk has come back to spending more on tax cuts rather than doing more to attack the deficit,” Mr Kompo-Harms said.
“I wouldn’t give the government a free pass to raise taxes, but the thrust towards tax cuts is taking public discussion in the wrong direction – away from budget repair.”
He said focusing on the deficit and building savings would put downward pressure on the exchange rate, which was important in maintaining Australia’s export competitiveness.
Many incentives we’ve had in the past to encourage personal saving through superannuation and investment have been clamped down on
- Geoff Hall, RSM Australia
His sentiments were acknowledged by West Australian business advisory director with accountancy group, RSM Australia, Geoff Hall, who has a sizeable farmer client base.
Savings incentives diluted
“Many incentives we’ve had in the past to encourage personal saving through superannuation and investment have been clamped down on in recent years,” Mr Hall said.
“If we’re going to move ahead as an economy, you need to look after, and encourage good fiscal prospects for, Australia’s middle wage earners and business sector, but that segment appears to be losing out these days.
He hoped next week’s Budget would lift the concession threshold on capital gains taxes paid by small businesses (up to $10 million annual turnover), as had been done for accelerated depreciation claims last year.
“Capital gains tax is proving an impediment to farm succession,” he said.
“The current qualification threshold ($2m) does exclude quite a few farm sector businesses these days, so Dad’s opting not to sell to one of the kids – the asset transfer is being delayed until he dies.”
Digital help needed
Also on the wider farm sector’s Budget wish list submitted by the NFF earlier this year is a request for seed funding to establish a voluntary Agricultural data code of practice and funding for a digital agriculture office to assist farmers to take advantage of new technologies.
NFF wants funds allocated for a pilot project to grow digital literacy and technology applications in rural Australia.
It has also sought $180 million to cover more mobile telecommunication blackspot improvements.
On the trade front, farmers are lobbying for a special trade envoy' to provide an agricultural producer’s perspective to international trade negotiations.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
