Explanatory Memorandum
(Circulated by authority of the Treasurer,the Hon Ralph Willis, MP)General outline and financial impact
Drought investment allowance
Amends the income tax law to provide for a deduction of 10% of the capital expenditure incurred on fodder and water storage facilities, water conveyancing facilities and minimum tillage equipment which satisfy the criteria of the drought investment allowance.
Date of effect: 24 March 1995
Proposal announced: 8 December 1994 and 23 March 1995
Financial impact: $15 million for 1996-97, $10 million for 1997-98. Financial impact for 1995-96 cannot be estimated accurately but is likely to be no greater than $10 million.
Compliance cost impact: There will be no additional compliance costs relating to the allowance to acquire fodder storage facilities or minimum tillage equipment.
In addition to their normal records, taxpayers who claim the allowance for water storage facilities and water transport equipment will need to have a water conservation plan in place. The water conservation plan will add to their costs.
Advisers should readily identify eligible expenditure and so taxpayers should not incur additional costs for return preparation. The new provisions have been written in a more explanatory drafting style using features developed by the Taxation Law Improvement Project. This should make them easier to understand.
Farm management bonds
Amends the Loans (Income Equalization Deposits) Act 1976 to make farm management bonds (FMB) more attractive investment vehicles for farmers. The 'default' investment component of FMBs is increased to 100%, the maximum amount of FMBs is increased to $150,000 for each farmer, withholding tax on withdrawal of FMBs is eliminated, and the treatment of FMBs where a farmer ceases to be engaged in primary production is brought into line with other repayments unrelated to serious financial difficulties.
Date of effect: Royal Assent
Proposals announced: 8 December 1994 and 23 March 1995
Financial impact: $6 million over the next four years.
Compliance cost impact: There will be no change in the level of compliance costs imposed on primary producers making deposits in FMBs.
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