STOCK shortages this year may rob some agricultural machinery dealerships of the full economic boost expected from the Federal government's temporary tax deduction changes at End Of Financial Year (EOFY) sales.
Also, unless farmers are thinking 12 months ahead and ordering farm machinery from dealerships now for delivery next financial year - given foreseeable extended delivery waiting times on most machines - there is a chance they, as well as dealerships, could miss out on the full tax benefit next year when the temporary deduction changes are due to end on June 30.
The Federal government introduced temporary tax deduction changes, including several forms of instant asset write-off, in October 2020 as a post-COVID-19 economic recovery stimulus measure to assist small, medium and large businesses.
The temporary changes enabled eligible farms and other businesses to claim the purchase price - initially up to a cap of $30,000 but later that year increased to a cap of $150,000 per asset - of essential equipment in the same financial year that it was purchased.
The introduction of instant asset write-off was one of the factors believed to have prompted record national tractor sales in the 2020-21 financial year.
Tractor and Machinery Association of Australia figures show a run of consecutive record monthly tractor sales started about March 2020, the same month as the back-dated temporary deduction changes came into effect.
Some of the temporary tax deduction changes ended on June 30 last year.
The remaining instant asset write-off variation, known as Temporary Full Expensing with an asset deduction cap of $150,000, is due to end June 30 next year.
After that, normal asset depreciation tax rules will apply and farmers will only be able to claim a percentage - it varies depending on type of equipment and application, but is generally between about five per cent and 15pc - of the purchase price as a tax deduction in any one financial year.
With a spike in farm profitability likely in the current financial year, due to the record harvest and exceptional sheep and cattle prices, the ability to reduce taxable income by deducting the full cost of each asset purchased this year is seen as timely and particularly important to farmers.
It is expected more farmers than usual will be looking to take advantage of EOFY sales to upgrade equipment while Temporary Full Expensing is available to help offset additional income and reduce their tax bill for the year.
As a consequence, those machinery dealerships with new or used equipment currently in stock or coming in, expect to clear everything that can be delivered to customers by June 30.
Those unable to obtain stock in time remained tight-lipped last week about the lost opportunity for EOFY sales.
Their concern is that if farmers cannot find suitable, available, tax-deductible equipment in dealers' yards with delivery guaranteed by June 30, they will turn to other deductible purchases - like immediate-delivery chemical or mineral farm inputs or some investment products - which will effectively divert potential revenue away from the machinery sector.
"It is going to be quite challenging for machinery dealerships with EOFY sales this year because the equipment has to be onfarm by June 30 for the farm to claim the tax deduction this financial year," said Ross Paterson, national leader, agribusiness with national audit and accounting firm RSM Australia.
"Because of supply issues, even our clients who ordered machinery last year and have been promised delivery before June 30, we are advising them to have a plan B ready, just in case," Mr Paterson said.
He said he had been advising his clients that if their new machine did not arrive a week before June 30, they should look at quickly putting some of their pre-tax income into Farm Management Deposits (FMD) or similar private schemes run by agriculture service providers like Nutrien Ag Solutions.
Under the Department of Agriculture, Water and the Environment's FMD scheme, The Australian Taxation Office (ATO) allows eligible primary producers to set aside up to $800,000 of pre-tax income in a dedicated FMD account with an authorised institution like a bank, credit union or building society, so that the funds can be drawn upon in less favourable future years.
According to the ATO, a tax deduction can be claimed on the income deposited into an FMD account in the financial year it is deposited.
It is assessed as income in the financial year it is withdrawn from the account.
Mr Paterson acknowledged that while farmers still had options to maximise their tax-deduction benefit this year, there was now nothing machinery dealerships without adequate new and used stock available for immediate delivery could do to improve their share of tax-deduction-driven sales before the end of the financial year.
"It is an unfortunate situation for some agricultural machinery dealers," Mr Paterson said.
"There is no doubt that had they had the stock available to them, machinery dealers would have had a bumper year.
"The other situation they need to be aware of is unless they are taking orders right now for delivery next financial year, there is a risk they could miss out then too.
"Because the supply issues and delivery delays might mean the machines arrive after June 30 next year, which will be too late."
Farm Machinery & Industry Association executive officer John Henchy agreed with Mr Paterson it was "unfortunate" some dealerships did not have stock available to take advantage of EOFY sales and the tax deduction incentive.
"It is effectively a double whammy for some (dealerships) this year - because of the difficulty in getting new stock, farmers ordering new machines are hanging onto their old ones," Mr Henchy said.
"Previously, the dealer would give the customer a date when they could expect to take delivery of their new machine and the customer would trade in their old machine knowing when the new one was going to turn up.
"The dealership then had a used machine it could put in the yard to sell immediately.
"But that doesn't happen now, customers are hanging onto their old machines so dealerships don't have the new machines or the used machines to participate in EOFY sales.
"Traditionally EOFY sales are not a big part of our industry in a normal year - they are more customer driven than dealer driven - but they are an opportunity in a good year like this one to earn extra revenue to end the financial year on a really good note, particularly with the tax incentives, so it is a shame some dealerships cannot do it this year.
"The other problem is, they could be in the same unfortunate situation again next year.
"Farmers need to understand the difficulty with supply and delays in delivery will be with us for some time to come.
"Some of the people I've spoken to recently have been quoted delivery in 2024.
"With the cost of machinery and the speed of technology change, dealers simply cannot afford these days to keep a machine in stock that doesn't already have a customer's name on it.
"Also, some manufacturers are now refusing to build machines unless they have customers' names on them.
"The days of walking in and buying the machine on display at your local dealership are pretty much over."
Boekeman Machinery, which has Case IH dealerships at Wongan Hills, Dalwallinu, Dowerin and Northam, is one of the few major machinery dealers expecting to have new tractors to sell at an EFOY this year.
"We have Case IH Magnums and JCB Fastrac 8330s turning up before June 30 which is great," said group sales manager Ben Boekeman last week.
"Yes, it is a difficult time at the moment getting stock (but) at the end of the day, the stock we have available prior to June 30 will sell - it's just a matter of what we will have," Mr Boekeman said.
Some dealers have new wheeled loaders in stock, but many agricultural machinery dealers' yards are bare.
Buyers looking on the used machinery market have more choice for tractors, tillage, seeding, harvest and hay equipment before June 30.
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