Murray Goulburn milk supply support package
In April 2016 Murray Goulburn announced they had overpaid their suppliers for milk solids supplied for the 2016 financial year.
Under the milk supply support package (MSSP), suppliers had two options to 'repay' the amounts overpaid:
- pay upfront in a lump sum in the 2016 income year
- accept a lower milk price over three years.
For suppliers who opted to accept a lower milk price over three years, reduced milk prices started in July 2016 and continued until September 2016, when the scheme was suspended.
Murray Goulburn announced in May 2017 that they will 'forgive' supplier obligations under the MSSP.
They will make an additional payment to:
- suppliers who made MSSP contributions via a reduced milk price between July and September 2016
- suppliers who paid upfront in the 2016 income year
- any former suppliers who recommence supplying milk to Murray Goulburn by 31 July 2017.
These payments will generally occur in the 2017 income year. Some suppliers who paid upfront or who recommence supplying to Murray Goulburn may receive an additional payment in the 2018 income year.
The tax implications are set out below.
If you operate on an accrual accounting basis, the additional payment you receive – or are entitled to receive – will be assessable in the 2017 income year.
If you operate on a cash accounting basis, the additional payment you receive – or are entitled to receive – will be assessable in the year you receive it.
As the MSSP did not create a specific debt for each supplier, the commercial debt forgiveness provisions do not apply to the forgiven amount.
Any additional payment you receive represents an increase in the price you receive for your milk supplies and will relate to a taxable supply. Account for GST in the usual way when you receive the payment. That is, show the amount you received at label G1 on your BAS for the tax period that you receive the payment and show an amount equal to one-eleventh of the amount you received at label 1A.
If you are no longer registered for GST at the time you receive the additional payment, you do not need to account for GST on the amount you receive. However, you need to include the full amount you receive as assessable income in your income tax return.
Help with managing your tax obligations
If this situation is affecting your business and you can’t meet your tax payment obligations, contact us on our business enquiries line to discuss your situation. We are offering supportive repayment arrangements and remission of interest where appropriate.
If you are a sole trader, and your debt is under $100,000, you can set up a payment plan using our online service. Alternatively, you can seek assistance from your registered tax agent.
We encourage you to lodge your BAS (either yourself or through your registered agent) even if you can’t pay, so we can understand how much support you need. Payment terms can be worked out later.
Information on the tax implications of Murray Goulburn's announcement that it will forgive the milk supply support package for milk suppliers.