Business income estimates for Farm Household Allowance (FHA) 002-02050030

Services Australia uses the customer's actual farm business income based on the latest tax return. Where there has been a change of circumstances, customers may provide a farm business income estimate for the current financial year. The customer's estimate must be considered reasonable for their claim to be finalised and used to assess their entitlement to FHA.

When the estimate:

• differs substantially from the income shown on the latest financial statements, the customer is asked to provide a projected profit and loss statement with an explanation for the variation. For example, reduced livestock numbers due to drought or reduced fruit volumes due to storms
• is a loss, and a loss is also shown on the latest financial statements provided with the claim, the estimate can be considered reasonable regardless of a significant difference between the loss amounts
• is an increase from a loss to a profit due to better conditions or a decline in expenses, it can be considered reasonable, with the customers explanation, regardless of a significant difference between the amounts

The amount of assessable income from the business is based on the actual income from the latest tax return or the reasonable current year estimate provided by the customer. Business income is converted to a daily amount and applied over the financial year.

Separate estimates are required for all farm and non-farm businesses. Record income from paid work, financial investments, shares, and other unrelated income sources separately. These are subject to reporting or the notification rules.

Customers who have had a change in circumstance can provide a business income estimate or revise their estimate at any time during the financial year. See Table 1, Step 2 on the Process page for options.

A change in circumstance including a change in estimate must be updated within 14 days as the change may affect the customers eligibility for FHA.

Services Officers must:

• have proactive conversations at every contact
• prompt customers to discuss their estimate for all farm and non-farm business when they advise of a change in circumstances. This includes receiving money from the sale of crops or livestock

Special rules apply for adjusting the farm business income estimate from a forced disposal of livestock. See Assessing income for Farm Household Allowance (FHA).

Customers can request a review of their business income estimates. The review will determine if the decision made on the information provided at the time the estimate was lodged was correct. The customer needs to reapply for FHA if they cancelled due to a correct assessment of a change in circumstances.

Customers determine the estimate by considering the known business income for the financial year to date, plus an estimate of the expected business income and expenditure for the rest of the financial year.

Total business income = all sources of directly related business income less allowable business deductions.

If a farmer has more than one business, or a single enterprise with entities, which are:

• not necessarily related (such as a farm and a petrol station), profits from one cannot be offset by losses from the other
• directly related (for example, the related farm business cannot operate without the farm enterprise), profits from one can be offset by losses from the other

Separate estimates are required for all farm businesses (including related business income) and non-farm businesses.

The customer's estimate must include:

• the value of trading stock on hand, noting that if the value at the end of the tax year is:
• greater than at the start of that tax year, the customer's profit from business must include the difference in these values
• less than at the start of that tax year, the customer's profit from business must be reduced by the difference in these values
• re-credited business deductions

Partnered customers must advise the estimated business income for each person. The sum of the amounts advised for each member of the couple cannot be greater than the total estimated farm business income.

Refer all estimates for farmers who have a trust or company to a Complex Assessment Officer (CAO) before updating an estimate. This ensures estimates are accurate and coded within the trust or company records. See Identifying and making suitable referrals to the Complex Assessment Officer (CAO).
Note: non-controllers of a trust and/or company cannot estimate entity business income. They will be assessed on distribution income, see Assessing and recording distribution income.

For a list of items that are not allowable for FHA business income estimates, see Table 1, Step 6 on the Process page.

In June each year, FHA customers should revise their business income estimate for the new financial year. If the customer advises their new financial year estimate is the same as currently assessed, update the estimate from 1 July of the new financial year.

Refer all FHA estimate updates for customers who have a trust or company to a Complex Assessment Officer (CAO) before updating the Farm Business Income (FBI). A profit and loss for the current financial year is required, however, a profit and loss statement (SU580) is not to be issued.

If a new estimate is not provided by the end of the current financial year, the customer's current estimate will be rolled over for the new financial year. If their rate of FHA is assessed using an incorrect estimate they may be overpaid and will have to repay any overpayment. Tell customers they can revise their estimate at any time during the financial year. Discuss their estimate when they advise a change in circumstances.