Article:

2022-23 Federal Budget: Food & Agri Perspective

07 April 2022

Andrew Jones, Partner, Tax |

In a Federal Budget particularly sparse on significant announcements, there were nevertheless some items of note for agribusinesses and food producers. If you’re unsure of how the 2022 budget impacts you, read on to find out what measures directly and indirectly affects the food and agribusiness industries.

Dams and water infrastructure spending

A significant figure ($6.9 billion) has been earmarked for major water infrastructure. In particular, the Government has allocated $5.4 billion for the Hells Gates Dam, proposed to be constructed on the Burdekin River in Queensland. If built, the dam would be a significant benefit to irrigated agriculture in north Queensland, permitting up to 60,000 hectares of irrigated farmland.

Whilst welcomed, the funding commitment for Hells Gates Dam is nothing more than a talking point, with no amount for this project specifically identified in the budget over the next four years. The majority of the budgeted funding over the next four years ($1 billion) appears to relate to much smaller – albeit no less significant – dam infrastructure, including:

  • The Paradise Dam improvement project in Queensland
  • The Dungown Dam and Pipeline in New South Wales
  • Stage 1 of the Darwin Region Water Supply Infrastructure Program in the Northern Territory
  • Emu Swamp Dam and Pipeline in Queensland
  • Various irrigation schemes and business cases.
  • Fuel tax cuts – limited help for farmers

The Government also announced a six-month temporary reduction to fuel taxes. Fuel excise and excise-equivalent customs duty rates for petrol, diesel and other fuels (excluding aviation fuels) will be halved from 30 March 2022 to 28 September 2022. This is one part of a suite of measures addressing cost of living pressures, and aims to deliver direct relief to the retail price of fuel.

Under the current rates, common fuels such as petrol and diesel are subject to excise or customs of 44.2 cents per litre. The change meant a new rate of 22.1 cents per litre applied from Tuesday, 29 March 2022.

However, for businesses already claiming a good majority of their fuel tax credits (for example agribusinesses), there will not be much of an effect other than cashflow timing.

These businesses will need to update their calculation processes to ensure the revised rates are applied. Care must be taken to identify the precise fuel purchase date, noting the change in rate does not neatly align to an accounting period.

NBN upgrade – fixed wireless and Sky Muster

The Federal Government will commit $480 million to fund the NBN Co’s upgrade of the fixed wireless network. Together with $270 million pledged by NBN Co itself, the fixed wireless network has been promised $750 million in funding.

Details are scarce, but we understand the existing fixed wireless customer base (about 636,500 premises, according to NBN Co) will be provided with upgraded signal technology, apparently including 5G. An additional 113,500 premises – for whom the only current NBN service is the Sky Muster satellite service – will have to access the NBN’s fixed wireless service.

The plan is that existing satellite subscribers, possibly as many as 120,000 of them according to NBN Co, will be moved to terrestrial fixed wireless, which will then free up satellite bandwidth.

The ability to access reliable connectivity with reasonable bandwidth and data availability is critical to modern businesses, and this upgrade will significantly enhance connectivity for food and agribusiness firms in regional and rural areas. Of all the budget announcements that potentially benefit agribusinesses and food producers, we like this the most.

Regional connectivity

A further $811 million over five years from 2022-23 has been committed to the competitive-grant-based Regional Connectivity Program and the Mobile Black Spot program. 

Whilst these programs have funded many worthy infrastructure projects to date, and the additional funding is much welcomed, mobile coverage (or the lack thereof) remains a major issue in regional and remote areas. Although mobile network operators indicate mobile coverage is available to 99.5% of the Australian population, the sheer scale of Australia makes reliable mobile coverage everywhere – or at least everywhere people want coverage - a daunting prospect.

Full asset depreciation not continuing past 30 June 2023

The Government has chosen to not extend multiple support measures previously aimed to incentivise increased investment in Australian businesses and help businesses recover from the impacts of COVID-19. In particular, the highly-publicised temporary full-expensing incentive and instant asset write–off will no longer be available for income years ending after 30 June 2023.

Skills and training boost

Small businesses with an aggregated annual turnover of less than $50 million will be able to deduct an additional 20% of expenditure incurred on external training courses provided to their employees. These external training courses must be delivered by entities registered in Australia, and are required to be provided to employees either in Australia or online.

Expenditure incurred between 7.30pm (AEDT) on 29 March 2022 and 30 June 2022 will be eligible to have the boost claimed on the 2023 income tax return. Expenditure incurred between 1 July 2022 and 30 June 2024 will have the boost included in the income year where the expenditure was incurred.

Taxation of Carbon Credits and Biodiversity Certificates

In a change worth $100 million to primary producers, the Government will amend the tax law so income from the sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates generated from on-farm activities will be included in primary production income for primary production tax averaging and the Farm Management Deposit (FMD).

Export, biosecurity and drought

The budget allocates additional funding to several existing programs, including:

  • $127.4 million to continue the digital transformation of agricultural export systems
  • $61.6 million over four years to fight the threat of lumpy skin disease and other biosecurity concerns across Northern Australia
  • $86 million to establish new forestry plantations
  • $84.5 million for drought readiness and resilience programs.

BDO Comment

The 2022-23 Federal Budget is a pre-election budget, full of short-term measures and disappointingly short on substantial expenditure programs or meaningful tax reform.

Agribusiness and food producers across the nation can reasonably look forward to connectivity improvements which should assist with market access, farm data processing and sensor networks, and entertaining the kids. Additionally, primary producers in selected irrigation regions may have improved water security in the medium term.

Given the Federal election expected in May this year, BDO expects that additional policy and spending measures relevant to food and agribusiness will be announced by both parties over the course of the election campaign. We call on both sides of politics to continue supporting agribusiness and food producers.

If you’re curious about how any of the 2022 Federal Budget measures will impact your Agribusiness, please contact your local BDO adviser.