Rules apply over worker housing

Many farmers have extra houses on their properties that they offer farm staff as part of an employment arrangement – without necessarily understanding their legal obligations.

Indeed around 80 per cent of permanent staff are provided with accommodation, typically included in the employment agreement allowing farmers to avoid lengthy tenancy contracts.

But a grey area for farmers is whether that arrangement falls under the Residential Tenancy Act or not.

Although generally farm employers don’t take a bond from the employee or have a formal tenancy agreement in place (outside of the employment agreement), this does not exempt them from the legislation.

Under the Residential Tenancy Act, a farm house provided to an employee is called a Service Tenancy. To the surprise of many farm employers, these houses are just as much caught by the legislation as any other residential rental property.

That means ensuring the properties meet specific requirements. Some of the key ones outlined below:

❚ Smoke alarms: All farm houses from 1 July 2016 must have working smoke alarms and when there’s a change of employees the landlord/employer is responsible for ensuring the new tenant has working smoke alarms. The legislation even specifies location, within 3 metres of each bedroom door.

❚ Insulation: Also from 1 July 2016, details about existing insulation must be stipulated in new tenancy agreements.

So, farmers taking on employees from this date need a statement recording the existing insulation details – and face fines if they don’t.

And, farmers should get a head start on rules coming into effect 1 July 2019, requiring houses to have adequate insulation in the ceiling and underfloor. Don’t leave this to the last minute, as installation firms are expected to get very busy closer to this date.

Given installation can be rather costly, there are two basic ways to work out tax deductibility.

If you’re replacing existing insulation, the new insulation is expensed and therefore 100 per cent deductible. If there’s no insulation, the new insulation is a capital expense, depreciated as a chattel over time.

Farmer employer/landlords must also calculate rent and pay PAYE on the rental. And, despite the tradition for farmers to charge moderate rents to reduce the amount of tax employees must pay, Inland Revenue now requires farmers to calculate rent at the market value and to document how they determined that value. did so.

The market value is pretty much the rent price that a willing landlord would accept from a willing tenant and that’s affected by factors such as location, size and condition of the property.

If in doubt, consult with your accountant or lawyer to ensure you are getting it right.

❚ BDO Taranaki specialises in rural business advisory services and its team of rural experts write a monthly column on financial issues affecting farmers. BDO Taranaki is an independent member of the BDO NZ accounting network. Principal Mark Irving heads the dairy section of BDO’s Agribusiness Sector Group. Notes from the farm walk at Dairy Trust Taranaki’s Gibson farm at Hawera for the 7 days ending on November 8 are:

Growth Rate: 82 kilograms dry matter/hectare/day. Previous

8-year average is 69kg DM/ha/day. November 2016 was 71kg DM/ha/ day.

Average Pasture Cover:

2243kg DM/ha

Rainfall: 16.3 millimetres last 7 days. Total for November is

16.3mm. 38-year average for November is 91.5mm. November

2016 was 127.6mm.

Soil Temperature: 14.7 degrees Celsius last 7 days. Range was

13.7-15.5C. 38-year average for November is 14C. November 2016 was 13.7C.

Current Situation:

❚ 11.8 hectares mowed for silage on the November 7. A further 18ha shut for silage. 1.5ha sowed with turnips

❚ There are 324 friesian cows (including heifers). 2.95 cows/ha.

❚ Production is 1.8kg MS/cow/day and 5.7kg MS/ha. Season to date production is 1 per cent behind last season

❚ Milkers are averaging 133 square metres/cow/day for estimated intakes of 18kg DM/cow/day pasture. Trial supplemented herds are being fed 3kg/cow/day of PKE (and offered 16kg DM/cow/day pasture) with the aim of creating a larger pasture surplus to negate the need to feed a higher level of PKE in summer/autumn.

❚ Rotation length is 18 days with silage paddocks out. Pasture demand is 74kg DM/ha/day.

❚ Urea is being applied behind cows at 60kg/ha.

❚ The latest feed quality result showed dry matter of 15.7 per cent, metabolisable energy of 12.5MJ/kg DM, crude protein of 24.2 per cent, neutral detergent fibre of 47.1 per cent. The sampling is sponsored by Ravensdown.

Current Trial:

Cows have been split into four herds – an all-grass farmlet stocked at 2.9 cows/ha, a herd which will be fed PKE, a herd being fed kibbled maize and a reserve herd. Both the supplemented herds are stocked at

3.3 cows/ha and will be fed supplements when intakes from pasture are below target (mainly early and late lactation).

❚ For further information, visit dairytrusttaranaki.co.nz/ resources.