Deferring livestock sales - it's like throwing a boomerang. It's coming back

Sam Martel Wednesday, 05 February 2020

If a grazier is forced to sell livestock (because of drought), they can elect to defer the taxable gross profit made on the sale of that stock and reduce their tax liability.

Many graziers have been forced to sell most, sometimes all their stock and have elected to use the livestock deferral. This can quickly add up to several hundreds and thousands of dollars. The tax saving in the current year is huge.

However, it is important to remember that the deferred gross profit from previous years is going to come back, just like a boomerang! This gross profit must be used to purchase replacement stock or treated as assessable income within 5 years.

If poorly managed a grazier can be forced to return previously deferred livestock sales in the same year they have made a large profit (perhaps a good winter crop harvest). This can lead to a significant tax liability.

We recommend deferred livestock sales are reviewed annually to ensure strategies are in place to effectively manage their return. This sometimes involves matching the return with super contributions, farm management deposits (FMD) or depreciation deductions.