The National Farmers' Federation reiterates significant concerns the impact the Federal Government's proposed tax changes on superannuation will have on thousands of family farms.
Evidence from financial and tax experts in a Senate Economics Committee Inquiry shows the agricultural sector will be unfairly hit with the changes that could even see families having to sell farms.
The Inquiry's report into the Economics Legislation Committee Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 was released late on Friday ahead of the legislation slated for debate in the lower house this week.
"Concerningly, the final report does not appear to address the issues raised by the NFF about the potential impact the reform may have on small business and family farms," NFF Chief Executive Tony Mahar said. "These reforms could be like a sledgehammer to succession planning for family farms. The nature of farming means the businesses are structured differently, so rather than making regular superannuation contributions, many farmers hold their homes and businesses in Self-Managed Superannuation Funds (SMSFs)."
"In many cases, older farmers will hold their farm in an SMSF and lease it to their children, providing both retirement income for them while giving the next generation an opportunity to start farming. We are extremely worried the proposed taxation of 'unrealized gains' on holdings will increase the tax obligation so much, farmers will be forced to sell land assets to pay the tax bill. Given high land values and modest cash income generated from farming, this new tax when will represent a significant proportion of a farmers' annual retirement income, or even exceed it."
"This may see the farmers left with a terrible choice. Sell the farm to meet these new tax obligations or increase their lease rates so much that their own children and grandchildren can't afford it and leave the industry. This is a lose-lose situation and undoubtably not what the wider community would expect these reforms intended to deliver."
The NFF's concerns have been echoed in the inquiry with evidence from the SMSF Association estimating over 17,000 accounts in 2021/22 held farming land and of these, more than 3,500 would impacted by the new tax. It's expected this figure could grow substantially higher in coming years if the Government continues not to apply indexation to the base threshold.
The Association states: "Farmers and small business operators with land and business premises owned by their SMSF may encounter significant liquidity pressures. Changes in property values do not automatically correlate to an increase in leasing income or rental yields… If such farmers do not have enough cash inside the SMSF or outside of the SMSF then they may have to sell assets (including the farm) to pay such liabilities."
Similarly, evidence provided to the inquiry by The Tax Institute, Financial Advice Association of Australia, and the Institute of Financial Professionals Australia also raised similar concerns about farmers unfairly being hit and the changes potentially forcing the sale of farms.
"It is imperative the Government reassess this tax and explains how everyday farming families will not become collateral damage as a consequence of this policy," Mr Mahar said.
Source: nff.org.au