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Conservation Tillage 15% Refundable Tax Offset

Conservation Tillage 15% Refundable Tax Offset

28 May 2013

Farmers will benefit from $44 million in Federal Government funding through a 15 per cent refundable tax offset (RTO) for new conservation tillage equipment. 

This initiative is part of the Federal Government’s Carbon Farming Futures program aimed at encouraging farmers to move to zero and minimum tillage farming techniques to enhance soil carbon, water retention and productivity. 

The tax offset forms part of the Clean Energy (Consequential Amendments) Bill 2011 which has passed through parliament and received Royal Assent. The Bill provides for a 15% RTO for certain new depreciating assets used in conservation tillage farming practices effective from 1 July 2012.

An entity will be entitled to the tax offset for the cost of an eligible asset that is: 

  • New (not previously used/owned by this or any other entity); 
  • Installed ready for use in the business during the year from 1 July 2012; and 
  • Used in the course of carrying on a primary production business. 

The following assets will be eligible for the 15% RTO : 

  • Tine machines fitted with minimum tillage points to achieve minimum soil disturbance and less than full cut-out, including narrow points, knife points or inverted 'T' points.
  • Disk openers (single, double or triple arrangements). 
  • Disc/tine and disc/blade hybrid machines.

The RTO will be available for eligible assets which the entity starts to use or has installed ready for use between 1 July 2012 and 30 June 2015 and will be claimable in the 2012-13, 2013-14 and 2014-15 income years. 

In order to claim the RTO, the entity must hold a Research Participation Certificate evidencing that the farming business has participated in research into the carbon sequestration properties of soil. Farmers will be able to meet this requirement by completing a survey. 

If you intend claiming the Conservation Tillage tax offset in the 2012-13 year, you must purchase and install the equipment and complete a 'Research Participation Certificate' application form before 30 June 2013 (see DAFF website).

Example of how the 15% refundable tax offset may apply

Fred carries on a business of wheat and other cereal crop production. 

On 10 July 2012, Fred goes into his local farm equipment store and buys a new tine machine fitted with narrow points. The tine machine fitted with narrow points, costs $100,000 excluding GST. 

On 10 August 2012, the tine machine is delivered to Fred's property and is ready to be hooked up to his tractor (at which point the asset is installed ready for use). 

After completing the research survey, Fred is issued a Research Participation Certificate by the Agriculture Secretary (DAFF) for the 2012-13 income year. 

Fred will be entitled to the conservation tillage offset for the 2012-13 income year. Fred is entitled to claim a $15,000 refundable tax offset as part of his 2012-13 tax return. 

For the 2012-13 income year before offsets and credits, Fred's tax payable on his taxable income is $10,000. However, the $15,000 refundable tax offset will mean that Fred's tax payable is reduced to zero and he will receive a tax refund of $5,000.


For more detailed information or to discuss how the refundable tax offset may benefit your business, please speak with your local Boyce Accountant. 

Tristan Lindner, Boyce Tax Team 

Information sourced from the Australian Government Department of Climate Change and Energy Efficiency http://www.climatechange.gov.au/government/submissions/closed-consultations/clean-energy-legislative-package/clean-energy-consequential-amendments-bill-2011/commentary/chapter-3.aspx as confirmed to have been passed through the relevant legislation 

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