More livestock valuation changes lurking around the corner
Parliament has passed legislation putting in place changes to livestock valuation that have been heralded for some time. But now it seems there are even more changes around the corner.
Although no official announcements have been made, it is understood the methods that Inland Revenue use to set National Standard Cost (NSC) values each year is being reviewed and is likely to mean that the values will increase dramatically.
For the 2013 year a 2-year-old heifer bred on the farm from birth will be valued under the NSC scheme at $592.50, made up of the 2012 breeding, rearing and growing cost for a rising 1- year of $473.30 and a rearing and growing cost for 2013 for a rising 2-year animal of $119.20.
Under what is proposed, it is possible that the value of the 2-year heifer may increase to as much as $1200, in effect 200 per cent of the present value.
This will have a major effect on the taxable income of those farmers with a large portion of their herd valued using NSC. It is understood there may be some spreading of the increase in value over two or three years, but the proposal will see some farmers’ tax bills increase substantially as the change is implemented.
A confirmed further change for the 2014 tax year will see the combining of friesians and jerseys; these breeds will no longer be separated out for valuation purposes. The effect of this is that friesians will be valued slightly lower while jersey values will rise. Elections to Join the Herd Scheme: Once an election to join the herd scheme is in place then a taxpayer can no longer elect to exit out of the scheme. Extra livestock above the herd scheme base number can still be valued using the alternative methods available.
Associated Party transfers: Where livestock is sold between associated persons then the buyer is required to use the seller’s herd scheme elections and base numbers. An exception to this applies where, in limited circum- stances, stock is sold as part of an inter-generational disposal.
Cessation of Farming: Legislation now requires farmers ceasing livestock farming to use the previous year’s herd value if the livestock is sold prior to November 1, while any disposals after November 1 will use the herd values from the current year.
Trevor Cooper, Director CooperAitken, Accountants Morrinsville and Matamata Tel: 07 889 7153 cooperaitken.co.nz.