Farmers exempt from new tax

Australia government’s Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019, removes deductions for costs incurred by owning vacant land unless it is being used by the owner or a related party to carry on a business. The law will apply to most non-corporate entities holding vacant land and earning income but not carrying on a business.

Under the proposed amendments, there was a concern that taxpayers who have borrowed funds to acquire vacant land will be denied a deduction for the costs associated with holding the land – e.g. interest on borrowings - where the land is being leased to an unrelated third party.

For example, a farmer that owns the property and leases part of their land on an ‘arm’s length’ basis to another farmer or takes the other farmer’s cattle on agistment, will not be allowed a deduction for expenses relating to the vacant land unless the land:

has a substantive permanent building/structure that is in use or is available for use having an independent purpose to another structure. (Farmland which is leased or used purely for agistment purposes is generally unlikely to have any substantial buildings or structures on it. Fences or farm sheds commonly found on agisted vacant land do not satisfy these requirements); and/or

is being used or is available for use in carrying on a business of the taxpayer or entities related to the taxpayer (such as an affiliate, spouse, or child of the taxpayer or an entity connected with the taxpayer). But unrelated third parties are excluded from this exception.

NSW Nationals Senator Perin Davey said he’d received different advice from stakeholders and that is not a good enough assurance for the farmers and farming families that he represents. Soon after, he updated that “we now have amendments to specifically exempt land used for primary production or land leased to carry on a business”.

Exception—land held by primary producers:-

(8) Subsection (1) does not stop you deducting a loss or outgoing relating to holding land if, at the critical time (see paragraph (1)(b)):

(a) the land is under the lease, hire or license to another entity; and

(b) you are, or an entity referred to in paragraph (2)(b), (c) or (d) is, carrying on a

*primary production business; and

(c) the land does not contain * residential premises; and

(d) residential premises are not being constructed on the land.

‘‘This is a win for farmers who can continue to lease their land and legitimately claim costs of holding that land as a tax deduction,’’ he said.

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