day 3 drought trip
day 3 drought trip

Tax cuts rain on drought-hit farmers

DROUGHT-declared farmers and business would be exempt from paying income tax - and states pressured to suspend payroll tax - under a landmark proposal being considered by the Morrison Government.

A suped-up life-support package will be taken to an expenditure review committee (ERC) on October 30 in Sydney as the Government moves to ramp up a new wave of financial assistance for despondent regions.

Separate to a Treasury submission to ERC, some in Cabinet have also discussed whether it should help subsidise the wages of those employed by struggling businesses, which are reducing the number of hours offered to staff in communities plagued by years of drought.

 

Treasurer Josh Frydenberg and Minister for Drought and Water Resources David Littleproud inspect the devastating drought conditions on Dino Rizzato’s farm at Cottonvale, near Stanthorpe. Picture: Kym Smith
Treasurer Josh Frydenberg and Minister for Drought and Water Resources David Littleproud inspect the devastating drought conditions on Dino Rizzato’s farm at Cottonvale, near Stanthorpe. Picture: Kym Smith

That is unlikely to be considered until early next year.

The Government, which will make new announcements in the coming weeks and ahead of the May Budget, is under pressure to keep regional towns alive and stem the haemorrhage of workers and families retreating from country towns.

Prime Minister Scott Morrison is likely to unveil the next drought steps before he attends the Asia-Pacific Economic Cooperation meetings in Chile in mid-November.

Farmers such as Granite Belt apple producer Dino Rizzato, who received a visit from Treasurer Josh Frydenberg and Minister for Drought David Littleproud earlier this month, say any help was appreciated as they struggled through crippling conditions.

It is understood Treasury has been asked to model the income tax holiday/rebate and will be thrashed out in an ERC meeting with Mr Morrison, Finance Minister Mathias Cormann, Mr Littleproud and Greg Hunt, who is assisting the PM in Cabinet matters.

Mr Morrison has repeatedly said the drought would be a major feature of the budget.

The Courier-Mail understands several scenarios will be modelled, including business turnover thresholds for any company tax cut holiday.

It will only apply to businesses in drought-declared areas that turn a profit - enabling them to keep on their staff and invest money back into their business.

It will supplement a wider, whole-of-government response, which could include redirecting funds from a number of portfolios, including infrastructure and environment.

It would also give the Morrison Government an ability to call on the state governments to do more, including giving business a reprieve from payroll tax.

Payroll tax is a state tax on wages paid by employers and in Queensland is set on businesses' yearly threshold in taxable wages.

The Palaszczuk Government is estimated to have raised about $4 billion in payroll tax in 2018-19.

From July this year until June 2023, the Queensland Government gave regional employers 1 per cent discount on the payroll tax rate.

However, giving regions a tax holiday may not have broad support in the federal Cabinet and an ideological debate is raging between members of the Coalition on what measures are enough for those on the land.

Many in the Nationals want a massive new financial injection for drought-declared regions to at least run into the hundreds of millions of dollars.

Some senior Liberals do not want to spend too much in that area but want the measures to be meaningful.

Those close to decision said the Government had to care, act and provide visible action.

The Nationals also want individual packages for each region in drought areas to keep workers in town.

Former deputy leader Barnaby Joyce yesterday tried to remind his colleagues that the drought was an issue Nationals understood best.

It was in response to unhappiness over Mr Morrison's dominance on the issue and the belief the Nationals were being forced into a policy back seat over the issue.

"The Nationals are driving the drought agenda, we are driving the response to the drought, we are making absolutely certain we are heard and I think it is absolutely important the policies the Nationals have been developing are seen in a public forum," Mr Joyce said. "We don't have to travel to another town to see the drought - it's in our town.

"We can see it every day, it's over our back fence, I see it out my front window.

"We understand this, we don't need someone else to explain it to us. We are driving an agenda and making sure our people are looked after."

Today, state and Commonwealth agriculture, drought and regional ministers will meet in Melbourne to discuss priority issues.

Mr Littleproud said a drought report that had been provided by the National Farmers' Federation would be considered by Cabinet.

"The drought is like going up a set of stairs, as the drought escalates we'll take another step up to address the drought,'' he said.