Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


The Importance of Budgeting & Tax Planning for Farmers

Media Release


The Importance of Budgeting & Tax Planning for Farmers


March 26, 2013


The financial year-end is near for farmers, but there is still time for them to manage profit levels in a way that could help avoid potential high interest penalties on tax payments, says Neil McAra, Managing Principal - Southland, for Crowe Horwath.

“Dairy farmers in particular should be providing for increased tax liabilities,” said Mr McAra. “In certain circumstances, if you haven’t paid enough tax during the year, the IRD can charge for use of money interest at a current rate of 8.4 per cent. Decisions on whether you incur expenditure before or after year-end can be significant.”

Mr McAra noted that farmers considering expenditure on items such as repairs to drains, tracks or additional fertiliser, should consider bringing these forward to enable a deduction in the current year. Repairs and maintenance were 100 per cent deductible and capital items depreciable over the life of the asset, he said. And there were strict requirements around what constituted repairs and maintenance, as well as specific regimes that provided concessions for farmers that differ from the usual capital/revenue distinctions.

“It pays to understand how these distinctions work and who they apply to, particularly where different entities own the land and carry on the farming activity,” he said.

Mr McAra said that having a budget at the start of the year and updating a forecast during the year was essential in order to have a clear understanding of the ability to manage tax payments.

“At this stage in the year, farmers should have a reasonable estimate of where their year will close out, and be making the necessary tax payments based upon that,” he said.

“If you are trading through a company, trust or an individual with high income levels, it is likely that you will be exposed to potential use-of-money interest penalties,” said Mr McAra. “You need to talk to your accountant now about ensuring you have met these obligations or have put processes in place to understand your requirements.”

Budgets are not only important for managing tax payments, but to understand cash flow needs, he said, especially for dairy farmers with strengthening cash flow over the next six months.

“The completion of a budget for next year will give them a greater understanding as to whether they look to reduce debt, undertake some capital expenditure or utilise the funds in some other capacity. Without the budget, they could be making decisions now that will strain their cash flow for the following season.”

Mr McAra said that even if cash flow did not permit meeting tax payments, there were options around financing the payments that could reduce the exposure from 8.4 per cent to around 6.5 per cent by utilising tax-pooling companies.

“Farming is a volatile business from year to year,” he said. “For example the dairy payout this year is up 30 per cent on the previous year and likely to be down 20-to-30 per cent next year. And interest rates are likely to increase over the next 18 months by two basis points. Without accurate budgets, farmers can be making poor business decisions.

“Budgeting need not be complicated and with the right advice can add value to a farm business. Businesses that budget, on average outperform those that do not.”


ENDS


About Crowe Horwath


Crowe Horwath New Zealand is the largest provider of practical accounting, audit, tax and business advice to individuals and small and medium businesses from a comprehensive network of over 20 offices.

Crowe Horwath is part of a global accounting network that delivers high quality audit, tax and advisory services in over 100 countries. We are the relationship that you can count on - large enough to offer a range of expertise and skills - and small enough to provide the personal touch.

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

BusinessDesk: SkyCity Lifts Minimum Convention Centre Investment To $430M

SkyCity Entertainment Group, the casino operator, has lifted the minimum it will invest in the Auckland International Convention Centre to $430 million and said total costs including land may be $450 million to $470 million. More>>

Statistics: Drop In Dairy Prices Leads Fall In Exports

Total goods exports fell $240 million (5.5 percent) to $4.2 billion in April 2015 compared with April 2014, Statistics New Zealand said today. More>>

BusinessDesk: APN's NZME Sees Future In Paywalls, Growth In Digital Sales

APN News & Media has touted a single newsroom concept for its NZME unit in New Zealand, similar to what Germany's Die Welt uses, saying an 'integrated sales proposition' is helping it win market share, including ... More>>

Labour Party: Global Milk Prices Now Lowest In 6 Years

The latest fall in the global dairy price has brought it to the lowest level in six years and shows there must be meaningful action in tomorrow’s Budget to diversify the economy, says Labour’s Finance spokesperson Grant Robertson. “Dairy prices ... More>>

BusinessDesk: NZ Inflation Expectations Creep Higher In June Survey

May 19 (BusinessDesk) - New Zealand businesses lifted their expectations for inflation over the next two years, sapping any immediate pressure on the Reserve Bank to cut interest rates, and prompting the kiwi dollar to jump higher. More>>

BusinessDesk: Lower Fuel Costs Drive Down NZ Producer Input, Output Prices

May 19 - Producer input and output prices fell in the first quarter, mainly reflecting lower fuel costs and weakness in prices of meat and dairy products. More>>


Media: Fairfax Media NZ Announces Senior Editorial Team

Fairfax Media New Zealand has today confirmed its new editorial leadership team, as part of a transformation of its newsrooms aimed at enhancing local and national journalism across digital and print. More>>

Science: Flavonoids Reduce Cold And Cough Risk

Flavonoids reduce cold and cough risk Research from the University of Auckland shows eating flavonoids – found in green tea, apples, blueberries, cocoa, red wine and onions – can significantly reduce the risk of catching colds and coughs. The research, ... More>>

BusinessDesk: RBNZ House Alert Speech The Catalyst For Government Action

Prime Minister John Key all but conceded that pressure from the Reserve Bank of New Zealand for concerted action on rampant Auckland house prices was one of the main catalysts for the government's weekend announcements about tightly ... More>>

BusinessDesk: How To Fall Foul Of The New Housing Tax Rules: Tips From IRD

Just because you rented out your investment property doesn't absolve you from paying tax, says the Inland Revenue Department in a summary of commonly made mistakes by non-professional property investors when it comes to their tax liability.More>>

Legal: Superdiversity Law, Policy And Business Stocktake Announced

Mai Chen, Managing Partner at Chen Palmer New Zealand Public and Employment Law Specialists and Adjunct Professor of Law at the University of Auckland, today announced the establishment ... More>>

Housing: More House Price Gains Expected

House price expectations remain high, with a net 56% of respondents expecting house prices will increase. Fears of higher interest rates are fading, consistent with the RBNZ’s signals this year. Affordability and a lack of houses for ... More>>

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news