The federal government will provide $70 million to help them claim accelerated depreciation for water facilities, fodder storage and fencing from July 1, 2016.
Farmers will get an immediate tax deduction for new investment in water facilities and a three-year depreciation allowance for all expenses storing fodder.
They will also be able to fully deduct the cost of new fencing from their tax bill.
The measures are designed to assist farmers to manage periods of drought better, and comes as a top-up to the $333 million drought support package announced by the government last weekend.
Treasurer Joe Hockey says the multi-million dollar commitment will help drought-affected farmers get through tough times.
Farmers were the most resilient of all Australians, the treasurer told parliament in his budget speech on Tuesday.
"They have to deal with the varied conditions of a big land, fierce global trade and ever increasing competition."
Further measures to help producers and boost agricultural production will be announced in the next few weeks as part of the agriculture white paper.
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