The Treasurer, Peter Costello, and the Minister for Primary Industries and Energy, John Anderson, today announced details of the Federal Governments new tax rebate for expenditure on landcare works.
"The Government has set aside $80 million from the Natural Heritage Trust to fund a tax rebate for landcare works of 34 cents in the dollar, effective from this financial year, fulfilling yet another election commitment made by the Government," they said.
"Legislation to provide for the rebate will be introduced into the Parliament in the next few weeks, and we expect that it will be supported by all Parties. This will ensure the rebate is available for the 1997-98 financial year."
The rebate will be available for the same type of expenditures and over the same time frame as the current tax deductions for preventing and treating land degradation (Subdivision 387-A of the Income Tax Assessment Act 1997) and for conserving or conveying water (Subdivision 387-B). These deductions were formerly available under section 75D and section 75B of the Income Tax Assessment Act 1936. Examples are provided below.
"Primary producers and businesses using rural land will be able to claim the rebate for works such as fencing to exclude animals from an area affected by land degradation, levee or contour banks to control soil erosion, drainage works to control salinity or drainage, and the eradication of plant or animal pests."
The arrangements for claiming the new rebate are not included in the Tax Pack for 1997-98, but the Australian Tax Office will have special arrangements for this year so that the rebate can be claimed by eligible taxpayers.
Those intending to use the new rebate will have the choice of claiming the rebate or using the existing tax deductions under subdivisions 387-A and 387-B.
An annual limit of $5 000 will be placed on expenditures that are eligible for the rebate under each of the subdivisions, allowing annual rebates for up to a total of $10,000 in eligible landcare expenditure.
The rebate will also be limited to taxpayers with taxable incomes of up to $20 700 a year from primary production. This represents approximately 70% of farmers who, because of their low incomes, are most in need of assistance to invest in required landcare works.
"Farmers who have eligible expenditure, but who do not fully use the rebate because it exceeds their tax bill, will be able to carry forward the rebate to future years."
Indicative Examples of the Effect of the New Arrangements
The following example illustrates the benefit of the rebate for a landholder without income averaging and with only the maximum allowable primary producer income of $20 700 (therefore with a tax liability of $3 060), who then invests the maximum amount of $5 000 in landcare works:
- if the landholder chooses to deduct this amount immediately under subdivision 387-A, then the landholders taxable income is reduced to $15 700, the landholders tax liability is reduced to $2 060, and the landholder has an after tax income of $18 640;
- if the landholder chooses to claim the tax rebate of 34 cents in the dollar then the landholders taxable income remains at $20 700 but the tax liability is reduced by $1 700, from $3 060 to $1 360, and after tax income is $19 340 (a benefit of $700 compared with claiming deductions under subdivision 387-A).
The following example illustrates the benefit of the rebate for a landholder without income averaging and with only the maximum allowable primary producer income of $20 700 (therefore with a tax liability of $3 060), who then invests the maximum amount of $5 000 in conserving or conveying water:
- if the landholder chooses to deduct this over three years (a deduction of about $1 700 a year) using subdivision 387-B, then the landholders taxable income reduces to $19 000, the landholder pays tax of $2 720 and has an after tax income of $17 980;
- if the rebate of 34 cents in the dollar is claimed then the landholder is provided with a tax rebate of about $1 700 over three years (a tax rebate of $570 a year) - taxable income remains $20 700 but the tax liability reduces by $570, from $3 060 to $2 490, and after tax income is $18 210, (a total benefit of $690 over three years compared with claiming deductions under subdivision 387-B).
A landholder without income averaging and with only the maximum allowable primary producer income of $20 700, who invests the maximum amount of $5 000 in each of landcare works and conserving or conveying water would receive each of the benefits detailed above.
Note that these examples are provided for illustrative purposes only. Those seeking to claim the rebate should consult with their accountant or financial adviser on its application to particular circumstances.