The WA Labor Party has asked Federal Treasurer Wayne Swan to consider a radical tax plan to help save farmers from financial ruin.
Shadow agriculture minister Paul Papalia wrote to Mr Swan yesterday asking him to consider the tax plan as an emergency measure for WA farmers facing the worst crisis to hit the industry for generations. Hundreds of WA farmers are sitting on tax credits worth millions of dollars after a run of loss-making seasons. Under the plan, farmers could utilise accumulated tax losses as transferable tax credits and use the credits in dealings with their banks.
Mr Papalia said Labor had taken the bold step after hearing the impassioned pleas of farmers for urgent action to shore up an industry where debt has soared to record levels.
"The model is worth consideration by the Federal Treasurer as an interim measure to help farmers get something back on the tax losses they have made before it is too late," Mr Papalia said.
Banking sources said accumulated tax debts of $2 million to $3 million were common among mid-sized farming businesses in WA.
The tax plan is being backed by an industry lobby group formed after a rural debt crisis meeting with Mr Swan, Federal Agriculture Minister Joe Ludwig, Federal independent Bob Katter and leading banks in Queensland in October.
The meeting, attended by Mukinbudin farmer John Shadbolt and WA's biggest grain grower John Nicoletti, led to the formation of the Rural Debt Roundtable Working Group, which presented a pre-Budget submission to Federal Treasury last month.
"The idea is to trade the tax losses for cash at bank as a short-term measure to stop the bleeding in rural Australia," Mr Shadbolt said.
"If a farmer goes broke and he has $3 million worth of accumulated losses, they disappear. Under this plan, it wouldn't be the full value of those accumulated losses but a proportion that could be turned into credits. A farmer could use those credits to reduce debt or to exit the industry."
Mr Shadbolt, whose family has been farming in WA for a century, said the outlook was bleak, with young people shying away from the industry and many growers anxious to sell their properties in a flat market.
Rural debt levels in Australia climbed from $1.9 billion in 1969 to about $64 billion in 2011 and are estimated to be approaching $70 billion.
RDRWG has warned the Federal Government that scores of rural businesses are on the brink of defaulting on their bank loans.