Tax Concessions for Primary Producers Affected by Bushfire

We're hoping you never do, but if your primary production business is impacted by bushfires, you may be eligible for the following tax concessions.

Forced Disposal or Death of Livestock

If you have lost livestock due to a fire, including being forced to dispose of livestock because of pasture or fodder being destroyed by fire, any profit made from insurance or forced sale can either be:

• spread over a period of five years, 
• Deferred and used to lower the cost of replacing livestock in the disposal year or any of the next five income years.

If you defer the profit, any unused amounts will be counted as assessable income in the fifth income year.

Losing Your Eligibility

Please note that you may become ineligible to spread income over a period of years if you:

• become bankrupt, insolvent or die,
• depart from Australia permanently, and
• cease to carry on the primary production business the election relates to.

Insurance Payments

Any insurance payments received are treated as assessable income if the insurance premiums paid have been claimed as a tax deduction. Any insurance payments that are to replace lost income will be assessable in the year they were received, subject to the deferral rule above.

Insurance payments made to replace property, plants, and equipment are treated as capital proceeds made on the disposal of the destroyed assets. There is a 'roll-over relief' available when the capital proceeds exceed the value of the destroyed asset. This allows for the profit to be offset against the cost of the replacement asset, rather than being declared as income. If the replacement asset is not purchased by the end of the following financial year, then the profit will be declared as assessable income. For the roll-over relief to apply, the following conditions must be met:

• The asset was not part of a 'Small Business Depreciation Pool' or 'Low Value Pool', and
• The replacement asset must be used wholly for business.

Disaster Relief Payments

If you have received any disaster relief payments from the government, charity, employer or another source as a one-off, these are likely to be tax-free. Any fees directly relating to obtaining or receiving these  payments may be non deductible. The common types of relief payments are:

• Australian Government Disaster Recovery Payments (DRP).
• Disaster Recovery Allowance (DRA).
• Payments under the Natural Disaster Relief and Recovery Arrangements (NDRRA) other ex-gratia relief payments.

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