A cup of tea and biscuits usually hits the spot after a morning milking cows, but did you know you can claim these as rations? Sharon Coombe, chartered accountant and Banklink certified administrator at Diprose Miller, explains the rules around rations.
Good news farmers - tea, coffee and even biscuits are a legitimate expense, but here at Diprose Miller, we often get asked, what can you claim as rations?
Generally, this depends on a number of factors, including the type of business and how it is operated. There is no one size fits all rule that allows a farmer to claim a set amount of rations on a weekly, monthly or yearly basis.
When are rations deductible?
Rations are deductible under the Income Tax Act 2007’s General Permission Test (Section DA 1) and are built on several legislative tests. They will be deductible if the expenses are incurred when carrying on a business for the purpose of deriving income and the expenditure is not of a private or domestic nature.
What can be claimed as rations?
Most farming clients typically claim rations for morning and afternoon tea-related expenses which are kept at the house or in the milking shed. For example tea, coffee, milk and biscuits. The amount claimed will depend on the number of business owners, staff employed and visits from vets, stock agents, bankers etc.
Where should rations be purchased from?
If farmers purchase the rations through trading stores, such as Wrightsons, Farmlands or Farms Source, you need to identify these for your accountant so they can be claimed for rations and not as a private expense.
If rations are purchased at the same time as your household groceries from the supermarket, it is essential that you identify which items are to be claimed for rations.
Can an annual rations allowance be claimed?
No, an annual rations allowance is unable to be claimed. Rather, you must have actual expenses for rations.
If you have any queries about what rations you can claim, please contact your friendly Diprose Miller accountant.
