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Consider Tax Implications of Changing Incomes

23 January 2003

PR 014/04

Farmers Should Consider Tax Implications of Changing Incomes

Farmers facing significant changes to their financial situation this year should start thinking about the tax implications sooner rather than later, says Tom Lambie, President, Federated Farmers of New Zealand (Inc).

"There are options open to both farmers who may have extraordinary income from the forced sale of capital stock and those whose incomes are likely to be lower than expected," said Mr Lambie.

Farmers forced to sell capital stock as a result of the dry conditions currently experienced in parts of the South Island should seriously consider using the Inland Revenue Department's Adverse Events Income Equalisation Scheme. This particular Income Equalisation Account allows farmers to defer the income tax liability on additional income generated by the forced sale of stock due to an adverse event such as drought. The money has to be deposited with IRD, but the scheme is flexible and currently earns 6.5% interest.

To use the Adverse Events Income Equalisation Scheme the individual farmer must make a statutory declaration that they have suffered an adverse event. There is no need for the Government to declare an adverse event has occurred.

"Farmers with reduced incomes should also consider revising their projected taxable income for the current year so that provisional tax payments can be adjusted accordingly.

Federated Farmers urges all affected farmers to consult their accountants or financial advisors sooner rather than later," said Mr Lambie.

More information is available from IRD PH 0800 377 774 or visit www.ird.govt.nz Federated Farmers Financial Members can call 0800 FARMING (0800 327 646).

ENDS

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