Farmers need greater flexibility in how their incomes are taxed. Farm incomes are at the mercy of market prices, weather, disease threats, interest rates hikes, to name just a few factors. We already have income averaging which allows farmers pay tax on the average of three years income, but with restrictions.
For Budget 2017, the IFA has proposed making income averaging available to farmers whose spouse has an income from self-employment.
It has also proposed a novel addition to income averaging which would allow farmers on averaging opt to pay tax on their actual income in a year where their profits take a drastic fall.
The untaxed income in the opt-out year would then be carried forward to be assessed to tax over a three year period. The association is looking for the flexibility to avail of opt outs from averaging for two years in any five year period.
The ICMSA has looked at the Australian Farm Management Deposits Scheme (FMDS) and proposed a system that would allow a farmer to claim a tax deduction for farm management 'deposits' in the income tax year in which they are made. The appropriate amount of the deduction would be included in the tax assessable income in the income tax year the 'deposit' is repaid to the farmer.
They are proposing a 'farm income volatility management tool' as a new tax measure for farmers, which would allow a maximum 'deposit' of 30pc of farm profits subject to a maximum deduction of €10,000. They also propose that profits 'deposited' would be subject to a 12.5pc rate of tax - which would be credited when profits are taken from the 'deposit' account and taxed.
They also propose that income averaging would continue to be available where farmers could opt for either three or five year averaging.
Farm Transfer and Restructuring
The farm organisations want the 90pc Agricultural Relief applying to the taxation of gifts and inheritances of land to remain. Between 2008 and 2011, tax exempt thresholds applying to gift and inheritance taxes were reduced by over 60pc. Budget 2016 started a reverse of these cuts.
The IFA is seeking a further increase in the Category A (parent to child) exempt threshold in Budget 2017 and future Budgets. The ICMSA is looking for the extension of 'Favourite niece/nephew' relief to nieces or nephews who have farmed the land under a lease agreement.
Capital Gains Tax Restructuring Relief, introduced in Budget 2013, is important in helping farmers consolidate holders through land swap, disposal and repurchase. The IFA wants this important relief extended past its current expiry date of the end of 2016.
They are also seeking the reinstatement of a relief called Joint Tenancy Ownership Relief which eased CGT charges on the dissolution of a partnership. The ICMSA wants a reduction in the current 33pc rate of CGT and an increase in the amount of chargeable gain that would be exempt for an individual to €5,000.
Both organisations are seeking an extension in the land leasing tax exemption on long term leases. The IFA is seeking the scheme to be extended to long-term leases between siblings but subject to restrictions. The ICMSA is also seeking its extension to family members.
Macra na Feirme wants Stamp Duty Relief for young farmers to be extended to purchases of land by farmers up to 40 years of age and greater flexibility in the 100pc young farmer Stock Relief.
The ICMSA has proposed greater flexibility in how capital allowances for on-farm investment work. It wants the flexibility to write off expenditure on farm buildings and plant and machinery over three to eight years with a 'floating allowance' of up to 50pc allowable in any one year.
Both the IFA and ICMSA are seeking extensions to the SEAI accelerated capital allowances on investment in energy efficiency equipment by sole traders in the agri-food sector.
The IFA has proposed incentivising renewable energy initiatives at farm level including a package of measures with proposals on the tax treatment of land leasing and CGT Retirement Relief as they would apply to renewable energy projects.
The IFA has proposed a package of measures on excise duties to support small scale cider production and a tax credit to support training schemes and help address skills shortages in agriculture.
Jim Devlin, former secretary of the IFA Farm Business Committee, is currently a managing director of FTI Consulting in Dublin