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Tax package fair to farmers

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PI 85/193 19 September 1985


The Minister for Primary Industry, Mr John Kerin said today that the government's package of tax reforms was fair to farmers, treating them in the same manner as other small business operators.

Mr Kerin said that farmers would appreciate the fairness of the package when they realised that, as a result of the tax changes, their marginal rates of income tax will fall.

"As well, the issue of greatest concern to farmers, the changes to the capital gains tax, have been made in such a way as to ensure there will be little impact on the rural sector," Mr Kerin said.

"First, capital gains tax will not apply when farmers sell a property which they currently own and will only apply to properties purchased after tonight," he said.

"Should a farmer purchase a property after tonight, then sell some time in the future, the difference between the purchase price and selling price, less the value of inflation during that entire period, will be the amount on which capital gains tax could be paid.

"The value of the family home, including the farm home with a reasonable curtilage allowance, will be exempted from the calculation for tax purposes," Mr Kerin said.

Mr Kerin said that, generally speaking, because land values do not increase at a rate much different from the inflation rate, farmers are likely to pay little or no capital gains tax.

"Moreover, capital gains tax will have the effect of discouraging speculative land dealings.

"Consequently, increases in land values, unreleated to its productive capacity, are likely to be less rapid than otherwise would have been the case," he said.

Mr Kerin said that the Government had been sensitive to the problems which could arise with taxes on capital gains realised at death and had taken appropriate action.

"No capital gains will be levied following the death of a taxpayer unless the assets are sold off by a beneficiary or administrator of the estate," Mr Kerin said.

"In other words, farms can be passed on to children without attracting tax," Mr Kerin explained.

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Mr Kerin said that farmers should be particularly mindful:

. that capital gains taxes had already applied in the Australian tax system,

. that it was an economic tool designed to encourage

scarce economic resources away from speculative investment into productive, job-creating investment and

. that it was likely that the capital gains tax changes

would have very little effect on the farm sector.

Mr Kerin said that the decision to limit the tax write-off available for non-farm income against farm income is aimed at giving full write-offs to genuine farmers only.

"Genuine farmers are also adversely affected by tax cheats and speculators who are able to avoid tax through minimising income and by trying to work up what were tax free capital gains," Mr Kerin said.

"By limiting the amount of non-farm income which can be written off against the farm, genuine farmers will still be able to enter into off-farm arrangements which will help to stabilise their income but the high income rip-off merchants wno would exploit farming will now have their activities

curtailed," Mr Kerin explained.

"This measure will be accompanied by a significant increase in the amount of non-farm income which can be taken into account for averaging purposes," he said.

Mr Kerin said that the tax reform package was a set of inter-related measures designed to promote a more equitable system which encouraged better use of the nation's scarce economic resources.

"In conjunction with the Government's overall economic success, this package will help to create a better climate for investment and risk taking," Mr Kerin said.

"Farmers should look at the measures and the issues they address, rationally and calmly," he said.

"When they do, they will find that those who might oppose the Government's reforms are doing so for their own purposes, without having the best interests of farmers in mind," Mr Kerin concluded.

Media Contact: Walter Pearson (062) 726649

Technical Contact: Jim Groves (062) 726661