As tax time approaches it’s important to remember that your tax return might have implications for your cashflow in the next financial year. Some points to consider are:
Grain sales
When did you sell grain over the last 18 months? Most people had a good cropping season in 2017 and given low grain prices at the time, many growers decided to hold the grain until prices started to pick up after July 2018. This means that despite a below average cropping year in 2018, actual income for the 18/19 financial year may be higher than expected. In a tight season, your potential tax payable could impact your cashflow for next financial year.
When is your tax payable?
Budgeting is critical in a tight cashflow year and underestimating or mistiming a cost can create problems. This is especially true for farmers paying tax based on a previous profitable year if the following season has been a poor one. Speak to your accountant to make sure you have a good picture of possible upcoming taxation obligations, then factor these into your cashflow for the year ahead.
FMD withdrawals
After a poor cropping season in 2018, withdrawing from an FMD could assist cashflow through the year. This is a good strategy which utilises the FMD as it is intended: to smooth out the fluctuations in cashflow from year to year. However, it’s critical to consider the possible tax implications around the timing of the withdrawal. Talk to your accountant before you make any decisions as it may be beneficial to shift the withdrawal date from June 2019 to July 2019 (assuming the 12-month minimum deposit) to move the income into a different year. It’s also a good idea to speak to your bank about your cashflow requirements over the June 30 period: there is often a need for short-term working capital over this time to manage tax planning.
Contact your local Rural Bank Relationship Manager if you’ve got any questions about FMDs or lending options: https://www.ruralbank.com.au/locate-us/relationship-manager-finder
The information contained in this article does not consider your personal circumstances and should not be relied upon without consulting your legal, financial, tax or other appropriate professional.
