A SMALL delegation of farmers is leading the charge to Canberra to have farmers exempted from new changes to company tax rules announced in this year's Federal Budget.
The farmers, from NSW, have met with senior MPs and their advisors to make them aware of the unintended consequences for thousands of Australian farmers of amendments to Division 7A of the tax laws.
The changes will tighten the non-commercial loan rules to prevent company shareholders from avoiding tax on the benefits they receive from those companies.
The Government wants to ensure the benefits provided by a private company to its shareholders, such as land, cars, boats and houses, are taxed and will earn the Government an estimated $10m a year.
Business lawyers and accountants are warning that farming families whose land is owned by a family company and who operate their business through a partnership or trust using the company's land will most definitely be caught up in the changes - unless the business, or farmer, starts paying rent to use the company's farmland.
Led by Coonamble district farmer and NSW Farmers Association treasury hopeful Susan McLeish, the farmers say the legislation will capture "bona-fide primary production business assets".
"Clearly the legislation is aimed at closing a loophole that enables shareholders or associates to utilise luxury company assets tax free," Mrs McLeish said.
She said an amendment was needed to "carve out" an exclusion clause for legitimate business assets.
"The proposed changes to Division 7A should not apply to business assets owned by a private company that are used exclusively in a business operated by a shareholder in the private company or an associate of such a shareholder."
Mrs McLeish was invited to voice her own concerns, and was not representing NSW Farmers Association, which has squarely lumped responsibility for the issue with the National Farmers Federation.
NFF chief executive officer, Ben Fargher, said this week that he has spoken with Treasury and Government officials, but had still not formally met with anyone on the issue.
Mr Fargher said he'd been given an assurance that, despite the July 1 start date, no changes would be made until there had been consultation with the farm lobby.
Mr Fargher said NFF had scored some success in carving out exemptions in previous situations where farmers would have clearly been caught up in the unintended consequences of a new piece of legislation. He was hopeful this might, too be the case with changes to Division 7A.
Treasury officials confirmed late Tuesday that they had prepared a discussion paper on the issue and had indicated at some meetings privately that there may be some clarification on farming companies.
NSW Liberal Senator, who first raised the matter in Parliament, said these changes were a "high impact, low revenue" measure which, like the old death duties, threatened to put a lot of farmers out of business.
"This is a dead set attack on the people who supply your tucker," Senator Heffernan said in the hearing.
"With great good will, I am instructed this may be an unintended consequence, and the people you're really after are the ones with yachts, lear jets and mansions…"
Senator Helen Conroy also asked for clarification under the same rules whether farmers would have to pay rent on a farm residence they live in, as a consequence of the changes.
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