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Welcome to Twomey Talk where you can take advantage of the specialist knowledge of our team & learn their thoughts on various issues that may
impact YOU!

BUY A BALE

Twomeys staff August morning tea raised a massive $2,062.40 for Rural Aid's Buy a Bale campaign, including dollar for dollar matching by the Count Charitable Foundation.

Twomeys also makes a monthly donation to The Count Charitable Foundation which in turn has also donated $10,000 to both Drought Angels and Aussie Helpers.

RURAL LEASES – TIPS AND TRAPS

It goes without saying that all rural leases should be documented; even leases for small parcels of land.

One of the issues that parties should pay particular attention to is that of repair, maintenance and capital upgrades. There are no fixed rules and the responsibility for these costs needs to be negotiated in the context of the term of the lease, the rent being charged and the state of the farm at the commencement of the lease. The general starting point with many leases is that the landlord pays for capital/structural replacements and the tenant pays for repairs. The parties need to be aware of those items where the definition of repair/replacement is grey; they also need to take into account the requirement for insurance.

One issue tenants need to be particularly mindful of is whether the landlord is required to replace a capital item if it is destroyed. It is often the case in commercial leases that the landlord has no such obligation and where leases have been based on commercial leases these type of clauses may remain. These issues are especially important in irrigation leases as the costs of repair and replacement of pumps and irrigation infrastructure can be very high.

It is good practice for tenants and landlords to agree a farm condition report at the commencement of the lease. This report should be as comprehensive as possible and where practical include an agronomists report detailing the state and condition of the paddocks including soil reports and weed reports.

One of the greatest areas of dispute at the end of a lease is around the weed burden in paddocks.

In NSW the Agricultural Tenancies Act contains provisions around compensation at the end of a lease. If a party has a dispute they should seek advice promptly as the deadline under the ATA for bringing a claim is a very tight 3 months.

ATO DEBT – EVEN UNDER PLAN – IS A DEAL BREAKER!

Over recent years, bank scrutiny of the ATO position of clients has gradually increased.

This is was originally on the back of the substantial increase in ATO debts during the GFC in 2008. The ATO was very supportive of business through this period and significant debt accumulated as a result. From circa 2010, this position changed and the ATO became much firmer and has since been the cause of many businesses been wound up.

The banks have gradually increased their scrutiny of the ATO debt position of clients. Until recently, a debt under an arranged payment plan (with an explanation as to why this occurred) or a recently repaid debt, were things that would generally be accepted by the banks. However, we are now in an environment (again with a large reason being the Royal Commission) where any ATO debt, even under a payment plan, is an automatic 'no' to any finance request. Furthermore, even if there is a debt that has recently been repaid, this can similarly stop a transaction from proceeding with many banks now wanting a 6 – 12 months clean history with the ATO.

So, what is the reason behind this? From the bank's perspective, ATO debts are due to GST and PAYG Withholding payments plus PAYG Tax Instalments for the clients themselves. Particularly the first two of these relates to money which the business is effectively holding on behalf of the ATO – it is technically cash that is never owned by the business and is just been administered by the business on behalf of the ATO. If the client is unable to make these payments, then it means one of two things. Either the client has a cash flow issue or has poor management ability. Both of these items are major red flags for the banks. It is not unusual for a business to have periods of tight cash flow, but the banks do not see delaying BAS and Tax payments as a solution to this. The clients need to work through this and, if required, look to their main bank for additional assistance.

There is no doubt obtaining a payment plan from the ATO is quick and easy and they generally refund any interest and thus it is also economical. If cash flow is, or maybe a little tight, an ATO payment plan looks like a quick,  simple and cost-effective option. We are now in an environment where this needs to be seriously weighed against any intended finance requirements, or annual reviews on existing finance, with a bank over the next 12 months (and not many businesses go 12 months without dealing with the bank).

From 1 January 2018 eligible small businesses (generally with less than $2 million turnover) will not be required to pay duty on certain types of insurance, including:

> Commercial vehicle insurance - for a motor vehicle used primarily for business purposes

> Commercial aviation insurance – for an aircraft used primarily for business purposes

> Occupational indemnity insurance (or professional indemnity) - covering liability arising out of the provision of professional or other services (other than medical indemnity insurance)

> Product and public liability insurance – insurance covering liability for personal injury or property damage occurring in connection with, or arising out of the products or services of, a business.

In order to receive the insurance duty exemption for your small business, you need to provide a small business declaration to your insurer. A declaration is only valid for one income year, so a new declaration will be required each income year.

www.revenue.nsw.gov.au/taxes/insurance/exemptions/sbe#type

PAYROLL TAX THRESHOLD CHANGES

Payroll tax is applied to a business's New South Wales wages that exceed the threshold. The current payroll tax rate is 5.45% on wages in excess of the threshold of $850,000. Businesses in NSW will benefit from a progressive increase in the payroll tax threshold over the next four years as follows:

 YEAR THRESHOLD 
2018-19  $850,000
 2019-20  $900,000
 2020-21  $950,000
 2021-22  $1,000,000

 

The $20,000 Instant Asset Write-off for small businesses with a turnover of less than $10 million is proposed to be extended to 30 June 2019. This change is not yet law.

RURAL FINANCIAL COUNSELLING SERVICE

Rural financial counsellors help farmers who are dealing with, or are at risk of, financial hardship.

Rural financial counsellors can:

> Help identify financial and business options, including negotiating with lenders

> Help develop an action plan > Help access the Farm Household Allowance (FHA)

> Provide information about government and other assistance schemes

> Provide referrals to accountants, agricultural advisers and educational services

> Provide referrals to Department of Human Services and to professionals for succession planning, family mediation and personal, emotional and social counselling.

There are 30 Rural Financial Counsellors located throughout

NSW, including offices at Young, Forbes, Dubbo, Mudgee, Ganmain, Crookwell and Yass-Gundagai.

A full list of Rural Financial Counsellors in NSW and their contact details can be found at:

http://www.agriculture.gov.au/ag-farm-food/drought/assistance/rural-financial-counselling-service/nsw

ATO ASSISTANCE

The Australian Taxation Office can help people affected by drought and other natural disasters by: allowing more time to pay tax debts without incurring interest charges and/or by arranging for tax debts to be paid in instalments without interest charges.

In special circumstances, the Commissioner for Taxation may release individuals from payment of income tax, fringe benefits taxes and some other taxes where it is shown that payment would cause serious hardship. The Tax Office will look at circumstances on a case–by–case basis.

FARM MANAGEMENT DEPOSITS

The Farm Management Deposit scheme enables primary producers to make tax-deductible deposits of up to a total of $800,000 during prosperous years and then redraw them (and pay tax on them) in less prosperous years.

Deposits must be held for a period of at least 12 month, unless the business subsequently experiences severe drought.

Farm Management Deposit balances can be offset against other primary production loans or debt to reduce overall interest paid. All major banks have now promised to offer offset facilities. Contact your bank manager for more

information.

www.ato.gov.au/Business/Primary-producers/In-detail/Farm-management-deposits-scheme

IMMEDIATE DEDUCTION FOR FODDER

Effective 19 August 2018, primary producers can immediately deduct (rather than depreciate over three years) the cost of fodder storage assets, such as silos and hay sheds used to store grain and other animal feed storage, making it easier for farmers to invest in and stockpile fodder.

Primary producers can also claim an immediate tax deduction for the cost of fencing and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills.

www.agriculture.gov.au/ag-farm-food/drought/assistance/tax-relief