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NFF does not support tax reform which would affect family farms.

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PETER CAVE:   The federal government faces a stoush with rural Australia over tax reform, amid concern the transfer of family farms could grind to a halt. The government is resisting calls to water down anti-avoidance measures in its business tax package. The National Farmers Federation has warned that the efficient operation of the farms sector could be affected.


Fiona Reynolds reports from Canberra.


FIONA REYNOLDS:   In the words of Democrat Leader, Meg Lees, the government already  has a lot of explaining to do with its business tax reforms. The minor party with the balance of power in the Senate is worried about how the coalition will fund its revenue-neutral plan. According to the Democrats' calculations, there could be a $2 billion hole unless the government delivers on six questionable revenue items. Now, another problem is looming for the government over the second phase of its plan. It's understood cabinet has given in-principle support to tough anti-avoidance measures - that includes taxing trusts and cooperatives, like companies, from 2001.


The National Farmers Federation says 96 per cent of farms are operated as family businesses. Executive Director, Wendy Craik, says this measure could impact on the intergenerational transfer of family farms.


WENDY CRAIK: A lot of family farms will remain in the hands of the older generations for longer than they otherwise would and, maybe, you know, down the track then family farms may well become a thing of the past as people end up restructuring.


FIONA REYNOLDS:   So what really, though, will be the impact on farmers?


WENDY CRAIK:   Well, the impact on farmers, potentially, will be that it will make running their businesses more difficult, and that in fact will increase their costs, and their compliance costs will go up. So once you have increase in compliance costs and potentially more complex running of businesses, that really doesn't have the benefits for exporters that we are all promised.


FIONA REYNOLDS:   So do farmers feel like they are getting it in the neck in these business tax reforms?


WENDY CRAIK:   Well, farmers are really concerned because while there were certainly real potential benefits in the first phase of tax reform in the GST tax package and the potential to save $900 million, depending on the compliance costs, they're really worried that those benefits will be eroded by some of the provisions in the government's response to Ralph. There doesn't seem a lot of point in giving benefits on the one hand and reducing them on the other. We're really looking forward … you know, we were really looking forward to a simplified tax system which had benefits for exporters, and that's what we're really after.


FIONA REYNOLDS:   So the government, basically, is doing itself a disservice?


WENDY CRAIK:   I don't think they're winning a lot of points in the farm sector with some of these issues in terms of transfer of family farms.


PETER CAVE:   Wendy Craik from the National Farmers Federation.