Smart business decisions can have tax advantages for successful farming ventures

See these five tips to maximise your tax returns in 2017: 

1)   Set your goal to be most profitable, not just to pay the least amount of tax.  Frequently, businesses can focus so much on minimizing tax obligations that they often lose sight of the business’ real focus – maximizing after-tax profitability for this year, and the years to come.

 2)   This tax year, invest in your farm. When making the decision to invest, farmers typically have two decisions; either to recognise their profits this year or to invest the profit for a possible increase in profit in the future.  

3)   Maximize capital asset tax treatment with deductions over multiple years. Your investments today can be deducted over multiple years. Therefore, tax planning must also be made with a multi-year perspective. A typical deduction structure would be 50% this year, 30% the next year, 20% the third year. Decisions that you make today will have an impact in the future years’ tax planning. 

4)   Right-size your capital investment needs.  The last three years were likely years of underinvestment in your fleets, or other capital assets. This may be the year to catch up on your capital investment plan. However, be careful not to try to put three years of postponed investments into this year. 

5)   Use VAT back loan payments to increase your farm’s financial resilience. Reclaiming your VAT payments is key to successful cash flow management of an agri-business (big or small). In the purchasing of capital assets the VAT payment can make up a significant part of the value. By structuring your loan repayment on your capital investment to include your VAT refund, you can accelerate your repayment, and ensure the financial resilience of your business.

An excerpt from a John Deere press release, February 2017.