Tax Measures in Mid-Year Economic and Fiscal Outlook 

In recent times we have seen cyclones, floods and devastating bushfires. If you are a primary producer, there are a number of special rules which apply to income you may receive, or expenses you incur, as a result of disasters such as bushfires and floods.

You can elect to spread profit from the forced disposal or death of livestock over a period of five years. Alternatively, you can elect to defer the profit and use it to reduce the cost of buying replacement stock or to maintain breeding stock for the purpose of replacing the livestock, in the disposal year or any of the next five income years. You need to include any unused part of the profit in your assessable income for the fifth income year.

Tax relief is available in respect of income from the sale of two wool clips arising in an income year because of an early shearing caused by drought, fire or flood. You can elect to defer the profit on the sale of the wool clip from the advanced shearing to the succeeding year.

As a general rule, where the cost of the insurance premium has been claimed as a deduction, payments received pursuant to a claim under the policy will be treated as assessable income.

You can make an election to include insurance payouts for loss of livestock or of trees that were assets of a primary production business in your assessable income in equal instalments over five years. If you do not elect to do this, the whole amount is taxed in the year of receipt. Elections can be made before or on the date of lodging the first return after receiving the insurance premium.

Excerpt taken from Tax Smart Australia - Annual Summary 2012

Instant Write-off of an Asset

Under the proposed amendments to the ITAA 1997, the small business instant asset write-off threshold will be increased from $1,000 to $6,500. The proposed amendments will implement one of the Government's responses to the Henry Tax Review in May 2010. The Government had proposed an instant asset write-off threshold of $5,000. This figure was later increased to $6,500 when the Government announced its "Clean Energy Future Plan" in July 2011.



Broadly, the amendments will allow small businesses that choose to use the capital allowance provisions in Subsidv 328-D to write off depreciating assets costing less than $6,500 in the income year in which they start to use the asset, or have it installed ready for use, for a taxable purpose during or before that income year. Other important points:

• The existing capital allowance rules about the taxable purpose proportion of the depreciating asset would still apply, and would affect the value of the deduction that can be claimed.

• Small businesses that choose to use the capital allowance provisions in Subdiv 328-D may also deduct the taxable purpose proportion of cost additions of less than $6,500 for assets costing less than $6,500.

• Existing rules for the disposal of assets that have been totally written-off would continue to apply.