C & W Partners Chartered Accountants

A WIN FOR PRIMARY PRODUCERS  

The changes proposed targeted the situation where company assets were used by shareholders as their associated entities at a nil value or at least a less than market value. The changes would have required market rent being paid to the company by the related entity. Where market rent was not paid then either: 

a) A loan was to be recognised to the value of the rent.  This loan was to be commercially based, subject to interest and minimum annual payment conditions.  Given the ongoing farm land use a loan would have been raised every year, or

b) Where a loan was not in place, a dividend would have been deemed to have been paid to the shareholder to the value of the rent.

Both of these circumstances would have been catastrophic for anyone captured. Significant tax liabilities would have occurred.

At the time C & W Partners, together with other interested parties made submissions to treasury advising of the potential effects on primary producers. We also briefed Mark Coulton our Federal member who also took up the cause.

Thankfully last month treasury made the following announcement.  The government undertook public consultation following the announcement of the measure and has now clarified aspects of the measure to ensure both the rural and small business communities are not unintentionally impacted. 

"After listening to the community- particulary the farming and small business communities- I have agreed to two new features to the measure," said the Assistant Treasurer. 

"We received submissions that genuine farming businesses and those small business that include a residence located at the business itself may have been unintentionally impacted- so we've listened to those concerns and acted decisively to provide certainty and clarity."

The non- commercial loans measure will now include:

• An "otherwise deductible rule" for certain payments- any "business use" assets (that is, not for private purposes) that are provided to a shareholder under a right-to-use or a licence (but not a lease of real property) will be disregarded from the amount of any "payment" made to shareholders as they will be deemed to be otherwise deductible.