FARMERS have been encouraged to reinvest in their properties as a result of this year's federal budget.
Under existing rules, a primary production business, such as a farm, could now deduct expenditure on a depreciating asset as the asset declined in value over its effective life, said a Rural Financial Counselling Service spokesman.
He said the requirement for primary producers to spread deductions across several years could reduce cash flow and deter them from undertaking capital expenditure that might have enhanced the profitability and productivity of their farm.
"These changes to accelerated depreciation of water, fencing and fodder storage assets will encourage primary producers to invest in these assets, which are an important part of mitigating and managing the risks of drought.
"It will also assist primary producers with cash flow, and encourage investment on farm."
This would mean a farmer buying a capital item under $20,000, such as a stock feeder, would be able to deduct the full depreciation allowance in the first year.
Philip Penman, principal of financial advice firm Hillross Tamworth, said small businesses, including farming enterprises, previously could only get an immediate tax deduction on assets up to $1000.
With this higher threshold, Mr Penman said farmers who met the criteria for a small business could take advantage of this by looking to purchase capital items, which could be anything from smaller machinery to computers.
Mr Penman said this budget certainly provided incentive for small businesses in rural areas to invest in their own business or property until June 30, 2016.
"Farmers traditionally look to invest back into their farm without looking so much at off-farm investment," he said.
"This will certainly be a further incentive for them to invest back into their property."
It would also encourage farmers to spend into their local economy, making purchases from their local businesses, Mr Penman said.
A further incentive for farmers in this year's budget was the immediate deductibility of expenses on fencing and water facilities, effective from July 1, 2016.
Mr Penman said this incentive was under the $300 million drought relief package but was not available until July next year.
"Farmers could be planning for these expenses next year, which will kick in after the completion of the immediate concessions for capital expenses up to the $20,000 threshold," he said.
For anybody deciding whether or not to make new investments into their property, Mr Penman said they should first see their accountant to ensure the decision was appropriate for their circumstance.
Confidence boost at Wagga
FOR some, the new budget announcement has been the push farmers have been looking for to purchase their wanted capital items.
Total Ag Solutions general manager Cath Dawson, Wagga Wagga, said within a few days of the budget being announced, they had farmers inquiring about numerous capital items, such as all-terrain vehicles and small tractors.
"The level of enquiry has definitely picked up," said Mrs Dawson (pictured).
"Any sort of immediate tax deduction would benefit farmers and give them some confidence to spend money.
"For those who were on the line, deciding if they wanted the machinery, the announcement gave them the incentive to make the decision."
With the end of financial year approaching, Mrs Dawson expected enquiries would remain strong.
The fact farmers only have until 2017 to make these tax deductable purchases should also give them the incentive to buy needed items now.
The budget announcement has given farmers confidence in her area, Mrs Dawson said, which boosted overall business confidence.
"Anything that increases farmers' confidence in spending money will have a positive effect on the business," she said.
