Monthly tax tip:

We are currently in the middle of a terrible drought which affects many Australians but will greatly affect primary producers. As our grounds dry up and the grass becomes non-existent, farmers are relying on fodder and bought water to keep their livestock alive. In these circumstances it may be appropriate to sell livestock that aren’t able to be properly maintained due to the increasing cost of fodder and water in the midst of a drought. After a large sale, the farmer may have profited quite substantially when compared to other income years – which of course creates a tax problem. Luckily enough, there are some tax relief options available to avoid paying large tax rates for forced livestock sales. A primary producer can elect to spread the income from a forced sale or defer the profit and use it to reduce the cost of replacement livestock over a period of five income years. This deferred profit can then be brought back in a low income year or just spread evenly over the five year period. You can use this method if you dispose of livestock or they die because:

• Your land is compulsorily acquired or resumed under an Act
• A state or territory leases land for a cattle tick eradication campaign
• Pasture or fodder is destroyed by fire, drought or flood and you will use the profits mainly to buy replacement stock or maintain breeding stock for the purpose of replacing the livestock
• They are compulsorily destroyed under an Australian law for the control of a disease (including bovine tuberculosis) or they die of a disease
• You receive official notification under an Australian law dealing with contamination of property.

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