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Accountants for farmers, orchardists and primary producers — Goulburn Valley

Registered tax agent · Shepparton North, by appointment · Australia-wide by phone, WhatsApp and video · Updated October 2026

Farming income rarely arrives in a straight line, and the tax system has rules built for that. SMT Accounting works with orchardists, dairy farmers, croppers and graziers across the Goulburn Valley, and with primary producers anywhere in Australia by phone, WhatsApp and video.

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Who counts as a primary producer for tax?

The ATO treats you as a primary producer if you are an individual, partnership, trust or company carrying on a business of primary production: cultivating plants or fungi, maintaining animals to sell them or their produce (including making dairy produce from your own milk), fishing or pearling, or tree farming and felling. The word that matters is business: a hobby or recreational activity is not primary production, and Taxation Ruling TR 97/11 sets out the indicators the ATO weighs.

Income tax averaging

Averaging evens out your tax over up to five years so a bumper year is not taxed as though every year looked like it. The ATO compares the tax on this year's basic taxable income with the tax at the rate that applies to your average income. If your average income is lower than this year's, you receive an averaging tax offset; if it is higher, you pay extra income tax on the averaging component. The adjustment is automatic and appears on your notice of assessment, and the first adjustment is always an offset or nil. Non-primary production income such as wages or rent is included in full under $5,000, shaded out between $5,000 and $10,000, and excluded at $10,000 or more.

You can opt out by written election lodged with your return, but the election applies to all assessments for the next 10 income years and cannot be revoked. We model it before anyone signs.

Farm Management Deposits (FMDs)

An FMD lets you set aside pre-tax income in a strong year and bring it back as assessable income in a lean one. The ATO's conditions are specific:

  • You must be an individual carrying on a primary production business in Australia when you deposit. Partners and trust beneficiaries hold FMDs in their own names; companies and other entities cannot.
  • Your taxable non-primary production income for the year must be no more than $100,000.
  • Total FMD balances cannot exceed $800,000; each deposit or repayment must be at least $1,000; and the deduction cannot exceed your taxable primary production income.
  • 12-month rule: withdraw within 12 months and the deduction is generally lost, so the earlier return must be amended.

Exceptions to the 12-month rule cover bankruptcy, ceasing primary production for 120 days or more, death, assistance after a natural disaster, and severe rainfall deficiency. For drought, the ATO requires the land to be within a drought-affected area and the deposit to have been held for at least the six-month drought period; the withdrawal is still assessable when received. We work out the tax position; you choose the provider, as we do not recommend financial products.

Fuel tax credits for off-road farm use

Fuel used in tractors, headers, pumps, generators and other machinery, or in vehicles travelling off public roads, can attract a fuel tax credit claimed through your BAS. Fuel used in light vehicles of 4.5 tonnes GVM or less on public roads is not eligible. We deliberately do not print a rate: rates are indexed every February and August, and the correct one depends on the date you acquired the fuel, the fuel type and the activity. The ATO's fuel tax credit calculator applies the right rate for each period, and that is what we use for every BAS. Keep fuel receipts and a note of how the fuel was used.

GST on farm sales and farmland

Most produce is sold GST-free as food, while agistment, contracting and machinery sales are generally taxable, so the mix on each BAS matters. The farm itself has a specific rule: a sale of farmland is GST-free where it is a sale of a freehold interest, the land was used for a farming business for at least the 5 years immediately before the sale, and the buyer intends to use it for a farming business. Fixtures such as the homestead, fences, sheds and dams form part of the land, provided private use of the residence does not strip the land of its character as farmland. If the conditions are not met the sale may be taxable, so confirm the position in writing before contracts are signed.

Fencing, water facilities, fodder storage and plant

Primary producers can claim these capital costs immediately rather than over years:

Fencing

Posts, rails, wire, gates and fittings, including capital repairs, alterations and extensions, where the fence is primarily and principally for use in a primary production business on land in Australia.

Water facilities

Dams, tanks, bores, irrigation channels, pipes, pumps, water towers and windmills, plus capital repairs and incidental structures such as culverts, deductible in full in the year incurred.

Fodder storage

Silos, hay sheds, grain storage sheds, liquid feed tanks and above-ground bunkers whose primary and principal purpose is storing fodder for livestock.

Partners claim their own share rather than the partnership claiming, second-hand assets have their own restrictions, and a silo holding grain grown for human consumption is not a fodder storage asset. Machinery is depreciated under the general rules.

Valuing livestock

Livestock is trading stock. At 30 June you can value it at cost, market selling value or replacement value, use different methods for different classes, and change method year to year, provided the opening value on 1 July matches the previous closing value. Natural increase can be brought in at actual cost or the prescribed cost set by regulation. The method moves profit between years, so it is a planning decision, not an afterthought.

Water entitlements and capital gains tax

The ATO treats water rights such as licences and allocations as CGT assets: a permanent trade is a disposal, and even a temporary trade is a CGT event. Which event applies, and whether rollover relief or the small business CGT concessions are available, depends on the facts. Before selling or transferring an entitlement, including between family entities, get the treatment confirmed; the ATO itself recommends advice or a private ruling.

Seasonal workers, STP and Payday Super

Seasonal and casual crews carry the same obligations as any employer: tax file number declarations, correct PAYG withholding, award pay and Single Touch Payroll (STP) reporting each pay run. The big change is Payday Super. From 1 July 2026, super guarantee is paid each payday rather than quarterly and must be received by the employee's fund within 7 business days of payday, calculated on qualifying earnings and reported through STP. With a large picking crew, the practical way to meet that window is a payroll system that pays super in the same run as wages. We set that up and run it.

Orchards and horticultural plants

Trees and vines are treated differently from fences and pumps. The capital cost of establishing horticultural plants (acquiring and planting, plus part of the preparation such as ploughing and fertilising, but not the land or clearing) is deducted over the plant's effective life, which you can work out yourself or take from the ATO's determination.

  • Effective life under 3 years: written off in full, generally in the first commercial season.
  • Effective life 3 years or more: written off at a fixed annual rate from the expected first commercial season, from 40% a year for a 3-to-5-year life down to 7% a year for 30 years or more.
  • Plants destroyed early, for example by hail: the unclaimed balance less any insurance is deductible that year. Lessees of the land are treated as owning the plants.

Structure and succession

Many farms run through a family partnership, a discretionary trust, a company, or a combination, often with land held separately from the operating business. Structure changes who can access averaging and FMDs (individuals only), how the CGT concessions and primary production deductions flow through, and how the next generation is brought in. A structure chosen for a parent twenty years ago is not automatically right for the children, so we review it annually. See our guide to business structures in Australia.

What SMT does for farms and orchards

  • Tax returns for individuals, partnerships, trusts and companies with primary production schedules, averaging and FMD reporting.
  • BAS including fuel tax credits worked out with the ATO calculator for each period.
  • Bookkeeping with livestock and crop accounts set up so the stock valuation and the P&L make sense to you and the bank.
  • Payroll and STP for seasonal crews, with Payday Super built into every pay run.
  • Depreciation schedules for fencing, water, fodder storage, machinery and horticultural plants.
  • Structure reviews, succession conversations and the tax side of farm or water entitlement sales.

The Goulburn Valley's mix of fruit, dairy, tomatoes and cropping means most farm families have more than one income stream and more than one entity. We serve that mix from Shepparton North, and clients Australia-wide.

This page is general information, not advice. The rules above were checked against the ATO pages listed under Sources in October 2026, and thresholds change. Your position depends on your own facts, so talk to us before relying on any of it.
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Frequently asked

Am I a primary producer for tax purposes if I only farm part-time?

Possibly. What matters is whether you are carrying on a business of primary production, not how many hours you put in. The ATO looks at indicators such as scale, repetition, intention to profit and business-like record keeping, and it treats hobby or recreational activity differently. We can assess your situation against the ATO's guidance before you lodge.

Do I have to use income averaging?

Averaging applies automatically once you have primary production income, and the adjustment appears on your notice of assessment. You can elect in writing to opt out, but the election covers the next 10 income years and cannot be revoked, so it is worth modelling first.

Can a company or family trust open a Farm Management Deposit?

No. Only individuals can hold an FMD, including partners in a partnership and beneficiaries of a trust in their own names. The partnership or trust itself cannot hold one.

What fuel tax credit rate should I use for the tractor?

It depends on when you bought the fuel, the fuel type and the activity. Rates are indexed in February and August each year, so we do not quote a figure here. We use the ATO's fuel tax credit calculator for each BAS so the rate matches the purchase date.

Is selling the farm GST-free?

It can be, where the sale is of a freehold interest, the land has been used for a farming business for at least the 5 years immediately before the sale, and the buyer intends to carry on a farming business on it. Each condition needs to be checked and documented before contracts are signed, and the income tax and CGT side needs separate attention.

Sources

Farming in the Goulburn Valley?

Bring us last year's return and your bank feeds and we'll show you what averaging, FMDs and the primary production deductions mean for your farm.

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