Tax Deductibility of Farm Sheds

Tax Deductibility of Farm Sheds

Fodder Storage Assets

In May 2015 the Government put in place changes to allow primary producers the ability to write off the cost of “Forage Storage Assets” over three years.  That is, you claim one-third of the cost in the year of acquisition and one third in each of the following two years.

A fodder storage asset is an asset that is primarily and principally for the storage of fodder. This means its main purpose must be to store fodder for the primary producer’s livestock.

Given a forage storage shed can be written off over three years, one wonders how many machinery sheds are being built under the guise of a hay shed.  The ATO gives an example of what they consider is “primarily and principally for the storage of fodder:

“A shed that is originally built for the purpose of storing hay but is occasionally used to store a neighbour’s tractor that is borrowed twice a year may still meet the ‘primarily and principally’ test.  This is because its main purpose is to store fodder.  Occasionally storing the neighbour’s tractor is insufficient to displace the shed’s purpose as primarily and principally to store fodder”.

Anyone thinking a machinery shed with a few bales of hay in a corner will make it may have a rude shock ahead.  I wouldn’t recommend risking it.

Depreciation of Farm Sheds

Unlike commercial sheds, agricultural sheds are considered plant and have an effective life for depreciation purposes of 40 years.  Using the diminishing value method, depreciation can be claimed on them at the rate of 5% per annum.

However, if you are a primary producer who is a Small Business you can choose to allocate its depreciating assets (plant) to a Small Business Pool and depreciate it at 15% in the first year and 30% thereafter.  As an agricultural shed is plant, it would be written off not too much slower than a forage storage shed.

To be a small business you need to have a turnover of less than $10 million. The majority of primary producers would meet this.  Previously the turnover test was $2 million.

So, for a Small Primary Production Business, most agricultural sheds can be written off at a fairly fast rate regardless of whether the shed is a forage storage shed.

Sheds costing less than $20,000

Primary production sheds costing less than $20,000 fully installed, may be able to be written off instantly if acquired before 30 June 2018.  Note you would need to add the construction and slab costs to the kit to determine if you are under this.

So before you go telling your accountant about the new “hay shed” you have built, consider what you could have claimed anyway.  In reality, the Fodder Storage write off is not that far in front.  At the end of the day, the full amount will eventually be written off.  It is only a matter of timing.  The government hasn’t really given much away!  

Flor-Hanly works with a wide range of clients including retirees, small and large commercial and agribusiness clients throughout the Central Queensland region. From primary producers to health professionals to Self Managed Super Funds, it doesn’t matter what your business is, we can work with you. Call Tony and the team in Mackay on 07 4963 4800.

Copyright 2018. Flor-Hanly Commercial and Agribusiness Accountants Mackay QLD. Tony Olsen is a Director of Flor-Hanly, Commercial and Agribusiness Accountants. Tony can be contacted on 07 4963 4800. Information provided in this article is of a general nature. It does not take into account your personal financial circumstances. Tailored professional advice should be sought before acting on any of the information contained.