TAX TIME TIPS FOR PRODUCERS:
THE end of financial year is now upon us and it’s a great time to start getting your taxes into shape.
For primary producers, including those in the North Burnett, tax time brings unique challenges and considerations.
According to the Australian Taxation Office, it can sometimes help to use a method of ‘tax averaging’ which enables you to even out your income and tax payable across a maximum of five years to allow for the good and bad years.
Using this method ensures you aren’t paying more tax than you need to.
For those who’ve never lodged their tax, the process is quite simple. It is important to note that your basic taxable income is your taxable income with some exclusions.
These exclusions are net capital gains, certain superannuation lump sums and death benefit termination payments and above average income of an author, inventor, sportsperson or other professional.
The amount of the averaging tax offset or extra income tax is calculated automatically and your notice of assessment will show in your averaging details.
The averaging rules take into account the comparison rate of tax, averaging component and the gross averaging amount.
Some say when your average income is less than your basic taxable income you will receive an averaging tax onset.
However, if your average income is more than your basic taxable income you must pay extra income tax on the averaging component.
If it turns out the averaging system is not for you, you can withdraw from the averaging system for 10 income years and pay tax at ordinary rates.
This simply means you’ll be taxed on the same basis as taxpayers not eligible for averaging provisions.
Once you make this choice it will affect all your assessment for 10 income years and this cannot be revoked.
If you’re a small business entity you carry on a business and must have an aggregated turnover of less than $10 million.
You can also choose to access the small business concessions that suit your business if you comply within the relevant year.
Who is a primary producer?
According to the ATO, as a primary producer your business would involve one of the following: plant or animal cultivation, fishing or pearling, or tree farming or felling.
The first option of plant or animal cultivation includes cultivating or propagating plants, fungi or their products or parts (including seeds, spores and bulbs).
It also involves maintaining animals for the purpose of selling them or their bodily produce.
For fishing and pearling, your business would be taking and catching fish, turtles, dugong or aquatic molluscs and taking or culturing pearl shells.
Tree farming and felling is planting or tending trees in a plantation or forest that are intended to be felled. It can also be transporting trees or parts of trees that you felled in a plantation or forest.
If you are operating a business of establishing trees for the purpose of carbon sequestration, you will be eligible for carbon sink forest deductions.
MONEY MONEY MONEY: It's time to start sorting out those dockets and getting organised for tax time.