New rules on live­stock val­u­a­tions

Matamata Chronicle - - Rural Delivery - By ANNA BEN­NETT and GAVIN HAD­DON

The In­land Rev­enue Depart­ment re­leased the Na­tional Av­er­age Mar­ket Val­ues for Spec­i­fied Live­stock at the end of May.

Th­ese new val­ues are based on a snap­shot of cur­rent mar­ket prices across New Zealand.

This year all dairy cat­tle saw sub­stan­tial in­creases re­flect­ing the high de­mand for stock, some of the rea­sons for this be­ing:

High milk pay­outs at the time of an­nounce­ment.

Con­ver­sions to dairy still oc­cur­ring.

De­mand for young stock from over­seas.

All th­ese fac­tors have kept the mar­ket prices up.

Sheep and beef cat­tle saw min­i­mal in­creases against last year’s prices.

Friesian and re­lated breeds 2012 (fig­ures in brack­ets are 2011)

Ris­ing one-year heifers $1234 ($1035).

Ris­ing two-year heifers $1806 ($1494.)

Mixed-age cows $2155 ($1766).

Ris­ing one-year steers and bulls $521 ($459).

Ris­ing two-year steers and bulls $822 ($767).

Ris­ing three-year and older steers and bulls $1077 ($988).

Breed­ing bulls $1526 ($1370).

Ris­ing one-year heifers $955 ($792).

Ris­ing two-year heifers $1620 ($1344).

Mixed-age cows $1923 ($1631).

Ris­ing one-year steers and bulls $412 ($363).

Ris­ing two-year steers and bulls $622 ($616).

$1198 ($1140).

As can be seen all cat­e­gories have in­creased.

For ris­ing one and two year olds together with mixed aged cows this in­crease is over 20 per cent on 2011 val­ues.

Mixed aged friesian cows in­creased the most by $389, a 22 per cent in­crease on 2011.

A full range of live­stock val­u­a­tions is avail­able on our web­site co­op­

There are two ways farm­ers value their live­stock

The Herd Scheme. This treats live­stock as if they were a cap­i­tal as­set. Gen­er­ally a safe op­tion for many farm­ers as it takes the volatil­ity out of the equa­tion. Un­der this method farm­ers are not taxed on shift­ing val­ues of the live­stock.

The Na­tional Stan­dard Cost. Here the val­ues rep­re­sent the es­ti­mated cost of pro­duc­ing an animal to year­ling age and to a two year old. Each year the val­ues change and af­fect the farmer’s in­come and there­fore af­fect their annual tax cal­cu­la­tions.

Within pa­ram­e­ters farm­ers were al­lowed to swap be­tween the two meth­ods. How­ever this has now changed and once you have elected to go into the Herd Scheme this de­ci­sion is per­ma­nent. Not only can you no longer change once you have elected to go into the Herd Scheme; the IRD went fur­ther and an­nounced that those elec­tions to use the Herd Scheme will be made ir­rev­o­ca­ble from Au­gust 18, 2011.

This ret­ro­spec­tive date of en­force­ment meant any elec­tions made this year were not ef­fec­tive and you are re­quired to use the Herd Scheme for the num­ber of stock in the Herd Scheme last year.

Leg­is­la­tion is still to be writ­ten and ap­proved and there are ques­tions still unan­swered with re­gards to trans­fers be­tween as­so­ci­ated per­sons in­clud­ing fam­ily trusts and com­pa­nies.

With the re­cently an­nounced ad­vance milk pay­ments for the 2012/13 sea­son it is im­per­a­tive that farm­ers un­der­stand the ef­fects of the live­stock changes on cash sur­pluses, profit and tax.

Th­ese ef­fects will need to be fac­tored into cash flow fore­casts, tax plan­ning and up­com­ing sea­son ex­pec­ta­tions.

To start a con­ver­sa­tion about how this af­fects you per­son­ally and to help build the best plan go­ing for­ward sim­ply give us a call.

We are here to help you im­prove busi­ness per­for­mance.

Gavin Had­don

Anna Ben­nett

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