24 May 2010

Meat companies likely to be stung by tax changes

6:06 am on 24 May 2010

Meat companies are likely to be among a number of rural businesses stung by property tax changes in the Budget.

The Government announced on Thursday that it was removing a tax loop hole for residential and commercial properties by denying them the ability to deduct depreciation on buildings.

Deloitte tax expert Mike Shaw says closing the loop hole for residential properties is a good idea.

But he says it is not fair for industrial buildings, including meat processing plants, coolstores, and dairy factories, that reduce in value over time.

Mr Shaw says these industries have special purpose buildings and once that purpose is finished, the building is not worth anything.

He says it would be expected that industry could claim a deduction for that loss in value in the building.

But Mr Shaw says the announcement means a lot of those buildings will not be able to be claimed as a tax deduction over time.

While company profits will be lower because of the reduction in value in the building, he says their tax bills will be higher, so they will be overtaxed compared to just about all other types of investment.

Mr Shaw believes the tax change may cost the meat, dairy and horticulture industries hundreds of millions of dollars.


The Meat Industry Association says meat companies will probably look to be made exempt from the property tax change, because their processing plants have estimated lives of less than 50 years.

Chief executive Tim Ritchie says it's entirely appropriate that companies should have the ability to depreciate such buildings.