CQ Today – Tax changes hurt farmers

When Paul Darmody’s dad passed away at a young age in the 1970s, he had to deal with the two realities of life at once: death and taxes. Back then, when your parents passed away, you had to pay death duties on the transfer of assets through their will. Paul paid the tax to keep the farm. Since then, Paul has built up the farm, opened a butcher shop to sell their meat, and now has enough business to support both himself and his daughter’s family. Thanks to the Joh government in Queensland, death duties were abolished. So when Paul Keating introduced capital gains tax in 1985, assets that had been bought before then were exempt. This was so that the tax was not retrospective and to reflect that many people had already paid tax on their assets, like Paul. Two weeks ago, the Labor Government blindsided Paul and other family farmers like him. The Government announced that it would remove the capital gains tax discount, despite promising the Australian people just a year ago, before the last election, that it would not. One detail that has been overlooked is that the Government is sneaking in a change that would see pre-1985 assets become subject to Capital Gains Tax for the first time. Labor says that it is returning to a capital gains tax system that existed before 1999 — the Paul Keating capital gains tax regime, if you like. This is just another lie. Even Paul Keating did not seek to retrospectively tax the capital gains of farmers. Labor is not returning to that model. Labor’s Budget is a major tax grab, especially on our nation’s farmers. Labor’s changes remove the current 50 per cent discount on capital gains and instead impose tax on the full capital gain after adjusting for inflation. Whether someone benefits from the change depends on their capital gain growth rate compared to the inflation rate. Because the previous discount was 50 per cent, if your capital gain is equal to the inflation rate there is effectively no difference under the new scheme, which removes the effect of inflation. One of the defining characteristics of Australian farming is that many farmers do not make much money from their operations but instead generate returns through increases in the value of their land over time. According to ABARES data, the average broadacre farm recorded a rate of return on capital of just 0.6 per cent in 2023–24. Over the past decade, again according to ABARES data, the average broadacre farmer has seen the value of their land increase by 9.8 per cent per year on average. Returns for Australian farmers are skewed towards capital gains rather than income, and so any increase in the taxation of capital gains is going to hit Australian farmers the hardest. On these stats, Labor’s change to capital gains will take the tax rate for a farmer from 23.5 per cent to a whopping 36.6 per cent. This would mean that Australian farmers would face one of the highest taxes on capital gains in the world, surpassed only by Denmark and Chile. When Labor announced its tax changes on Budget night, it said it would consult with the start-up industry about the changes. Since then, Labor has had to concede that it may need to make further changes given the massive public backlash to its tax grab. Yet nowhere has Labor recognised the devastating impact its tax changes would have on farmers. Our farmers are already facing tough conditions, with skyrocketing increases in the prices of fuel and fertiliser. Farmers know that they cannot avoid taxes, but they do not need more of them adding to their stress.