A new Prime Minister, a new Treasurer and it’s the same old advice from Treasury that if government wants to lift employment the fastest way to do it is through encouraging the small business sector. Finally someone is starting to join the dots with the former Treasurer, now Prime Minister moving to promote the role of Minister for Small Business held by Mikala Cash a Western Australia into the inner-cabinet.
Once you leave the confines of any one of our capital cities you come to quickly realise that agriculture is the backbone that supports the majority of our regional centres, whether that be the local supermarket, the mechanic shop or the local tradespeople. Moreover, agriculture is a key driver that attracts and retains people to live and work outside of Australian cities in a sustainable business.
The money that supports these jobs and businesses comes out of the profits that farmers generate. These profits at the end of the financial year either be diverted to Canberra in the form of tax that mostly flows to the metropolitan areas; alternatively, it can be sunk into growing the profitability and productivity of our farms and supporting the sustainability of our regional communities.
As part of annual farm budget planning all farmers are making decisions on where best to allocate their capital. If the government is enforcing onerous tax rates on small business, they are effectively encouraging businesses to look for more and more risky avenues to minimise their tax burden. Conversely, if tax rates are low, it will encourage farmers to reinvest back into their farms and small businesses. As farmers are innovative people, any available capital will see them employ new technology and opportunities onfarm to improve their productivity allowing them to grow more grain, grapes, wool or the hundreds of produce lines that Australia’s 80,000 farm business annually make them viable and profitable businesses.
Farm businesses are watching the new Prime Minister to see if he is going to improve on the 2018 budget offering to small business which offered to extend the instant asset write-offs for another 12 months to 30 June 2019 for asset purchases up to $20,000. And lift the turnover threshold to be eligible for the reduction in company tax rates from 30% to $27.5% from $25m to $50m.
Even with the changes Australia will remain with some of the highest business tax rates in the OECD. Out of the 34 OECD countries, Australia ranks 13. Australia if it is to remain internationally competitive needs to immediately move to a company tax rate of 25 percent and not wait 8 years until 2026-27 when the 25% rate cuts in. Ideally it would drop the rate to 21% to match the new United States tax rates in an effort to support our farmers to investment in machinery and people to grow more food. Australia’s economy will grow; jobs will be created; and Australia will remain competitive with other OECD countries.
PM SCOMO is talking about his ‘exciting new’ tax package for small and medium businesses. WAFarmers believes this is the ideal time to put in place ä tax rate that will focus farmers minds on reinvesting into their businesses this can be done through either a lower tax rate or through accelerated depreciation that will encourage farmers to invest in the fixed assets and machinery which will most certainly improve the long term productivity of their businesses and the output. WAFarmers and the National Farmers Federation are striving to make agriculture a $100 billion industry, and something as simple as accelerated depreciation could be of great assistance in reaching that milestone.
Currently the rate of depreciation of sheds on agricultural properties is 4 percent over an effective life of 50 years. WAFarmers believes by increasing this to 10 percent creates much needed available capital. For example, a $250,000 shed would make available $25,000 to be invested into the business. This coupled with the instant tax write off (for purchases of $20,000) creates an opportunity for a farmer to invest in much needed machinery and infrastructure to achieve efficiencies in their farming system.
These concessions will also further help farmers mitigate risk for drought and poor performing years as they will have capacity to invest in silos for feed, water tanks and troughs and have savings in the bank account. Additionally, this will also offset some of the costs incurred when a farming business is transferred from one generation to the next.
WAFarmers is calling on the Prime Minister and his Cabinet colleagues to assist farmers in continuing to be the world’s best in their chosen profession. By freeing up capital to allow them to expand and improve business will see more jobs in regional areas, support of affiliated sectors and an increase in exportable commodities which makes our farmers and the nation more profitable.