Labor’s promise that it wouldn’t come after the family farm is another Labor lie, as thousands of farmers across Australia using Farm Management Deposits (FMDs) face losing access to a scheme that is meant to protect them.
Senate Estimates revealed farmers could lose access to vital FMDs under Labor’s tax changes to discretionary trusts.
But the Department of Agriculture, Fisheries and Forestry can’t explain exactly what it means for farmers.
Despite one in three of Australia’s 37,663 agricultural trusts reporting earning non-primary production income, the Department could not say how many agricultural trusts will be affected by the minimum 30 per cent tax when it commences on 1 July, 2028.
Labor has previously indicated the discretionary trust changes will raise $4.5 billion in extra revenue a year, but refuses to say how much of that will come from farmers.
Nationals Leader Matt Canavan said the changes were an attack on the family farm.
“Labor is coming after the family farm by stealth, by taxing the family farm,” Senator Canavan said.
“Labor’s higher taxes were not taken to the election, no one voted for it, but these changes will have an enormous impact on our farmers and their succession planning.
“There is a huge risk that if a farm business is restructured from a discretionary trust to a company, they will no longer be able to access the FMD. This means farmers will face thousands in extra taxes. At the same time, Labor is trying to force people to move into new structures because they know they will get more tax out of it.
“There is also now ambiguity around farmers’ assets. For example, if a farmer uses a tractor for both primary and non-primary production, what are the tax implications? If the Department can’t understand it, how can a farmer understand it?”
FMDs have long been an important tool that allows farmers to manage volatile income and remain self-reliant through droughts, floods and fires. The total holdings in the FMD Scheme are around $6.24 billion.
Shadow Agriculture Minister Darren Chester said while the Budget announced that primary production income, such as farming, would be exempt from the new minimum 30 per cent trust tax, farm income from other sources will be hit by the tax.
“The government has encouraged farmers to diversify to build resilience, through things like hosting energy infrastructure, a farm stay, a wedding venue. But that income isn’t covered by the exemption,” Mr Chester said.
“Farmers were told farm income would be exempt. It isn’t. Labor is forcing farmers to choose between paying the new minimum tax, restructuring parts of their business, or giving up the flexibility that their trust currently provides.
“This is a complex change that could push farm businesses to restructure, yet the Department couldn’t tell Estimates how many farmers will pay more tax or how many could lose access to Farm Management Deposits.”
Shadow Assistant Treasurer and Shadow Minister for Financial Services Kevin Hogan said farmers also faced uncertainty about accumulated tax losses and future capital gains if they were pressured to restructure.
“Farmers who have accumulated legitimate tax losses during difficult years could find those losses stranded or unable to be used in the way they expected if assets are transferred into a new structure,” Mr Hogan said.
“The Department could not explain the treatment of those losses at Senate Estimates and admitted it had not pursued the issue with Treasury.
“Farmers should not be forced to risk the value of legitimate accumulated losses because Labor failed to work through the consequences of its tax changes. A future Coalition Government will fix this mess.”
