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Over time, I’ve noticed that many growers tend to overlook grain marketing and its connection to tax planning. However, the way you market your grain has a significant impact on your cash flow and overall tax position. The options of cash contracts, pools, swaps and futures all have different impacts on your taxable income from one year to the next.
From what I’ve heard, relying on a single grain sales strategy might not work every year. Some years, waiting until July to sell your grain might not be the best decision, while some years it might. Rather than relying solely on hope, it could be beneficial to consider various factors that may contribute to a potential rise in the market.
When you do decide to sell, which marketing option will provide you with best tax outcome? From a tax accountant’s perspective, (i.e., myself), this depends on the bigger picture. That’s why we always recommend undertaking tax planning. However, we can summarise the impact of the various grain marketing options as per below.
It's important to keep in mind that the deferred contract can impact your tax position at the end of the financial year. To avoid any possible complications, it's essential to discuss this matter with us.
When it comes to Pools, there are different options to consider. Advanced pools can result in the majority of your taxable income being received in the year of delivery, while traditional pools offer a set number of distributions across two financial years. Deferred pools, on the other hand, provide the flexibility to move the entire income into the following financial year.
If you close out early rather than offsetting with physical price and delivery, you could incur a realised tax loss which can impact the overall taxable income of your trading entity.
Depending on when you close out of positions, this will impact your tax outcome.
It’s important to discuss your grain marketing strategy with us to identify any potential tax implications, not only in the current financial year but also over the longer term. Our goal is to help you maximise your hard-earned profits, and effective tax planning plays a significant role in achieving this objective.
The Western Australian Government has announced a targeted grants program to assist small businesses highly impacted by the recent Perth and Peel lockdown. Is your business eligible?
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