Levies have bigger impact on bottom line

Accountant Judy Snell claims agriculture industry levies take 12-15 per cent off the bottom line of a Wheatbelt farm.
Accountant Judy Snell claims agriculture industry levies take 12-15 per cent off the bottom line of a Wheatbelt farm.

THE cumulative impact of industry levies and royalties is costing Western Australian farmers between 12 per cent and 15pc "off your bottom line" the 2019 Pastoralists and Graziers Association of WA convention at Crown, Perth, was told on Friday.

It was up to the pastoralists and graziers to determine whether they thought they were getting "enough bang for your buck" return from industry bodies at that rate, accountant Judy Snell told the convention.

A director of RSM Australia and of its Moora business advisory division and liaison director for regional WA, Ms Snell specialises in advising farmers and pastoralists.

Her family also operates a sheep and grain farm at Walebing.

She told the convention that the Department of Agriculture and Water Resources collects, administers and disperses levy funds to 18 industry and research bodies and in 2017-18 it disbursed $839.8 million in levies and Commonwealth matching payments.

Since 1997 government guidelines determined who can raise levies, how they are raised and how funds are spent, she said, with scope to change levy rates, as happened last year with the wool levy.

Funds raised can be used for biosecurity preparedness and emergency plant, pest and animal disease responses, research and development, chemical residue testing and in some instances marketing.

The nature of farming in WA meant most farmers paid multiple levies across about 12 commodity groups, she said.

Typical cumulative levies payed by WA farmers included 1.5pc of the sale price of wool, 1.02pc of sale value of wheat, barley, canola and lupins and 50c a tonne on fodder, Ms Snell said.

Typical cumulative livestock levies included 0.95323 cents per kilogram on cattle exports and 60c per head on lamb and sheep exports, 0.6c/kg on cattle processing, 16c per head on lamb processing and 15c per head on sheep processing, $5 a head on cattle transactions and either 20c per head or $1.50 a head on lamb and sheep transactions determined by certain criteria, she said.

Ms Snell said she used her client base to determine production figures for a typical Wheatbelt farm and then extrapolated those levies across gross income to determine what an average farm might pay.

Her "assumptions" were based on a farm selling 2000 tonnes each of wheat and barley at $300/t, 1000t of lupins at $340/t, turning off 1500 lambs sold at $140 a head, running a flock of 5000 sheep which produced 120 bales of wool sold at $2000 per bale and 1500 of them sold at $150 per head.

"On a gross income of $2.215 million I extrapolated that out to a total amount of levies paid of $20,373, or approximately 1pc of gross turnover, which I thought wasn't too bad," Ms Snell said.

"But as an accountant, I like to look at the bottom line as well as the top line.

"If we assume a return of around 6pc which I don't think is unreasonable and I've kept it at the company tax rate of around about 27.5c in the dollar, because that is where most farms probably are heading, levies actually represent 12-15pc of your bottom line," she said.

"I then went and had a look at our (Walebing farm) numbers and I got really depressed and went and found a bottle of wine.

"It actually ended up quite a large number - six figures in our case.

"The simple message is levies might only be 1pc of gross turnover, but they are really 12-15pc of your bottom line.

"There is $839m per year raised from those levies on agriculture, are you really getting enough bang for your buck from that?

"I think we need to talk about accountability and transparency".