Friday, 25 May 2012 09:51

Tax rules well signalled

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Federated Farmers believes tighter tax rules around livestock valuations have been well-signalled.

"Most farmers are reliant on accountants for their business tax needs and I'm no exception," says Bruce Wills, Federated Farmers President and its economics and commerce spokesperson.

"This is no different to a range of professions, such as freelance journalists or even actors. We all recognise the need to meet our tax obligations without overpaying. I don't think there'd be too many wage and salary earners who'd disagree.

"Back in March, the Government announced the herd scheme election would be irrevocable from August 2011. 2011 is not a misprint as it is being applied retrospectively.

"This is unusual but we were also aware a spike in livestock values had encouraged some farmers, on advice from their accountants, to elect out of the herd scheme. Arguably this may have come as a result of impending legislative changes clearly signalled last August. "

The Government made it clear it wasn't prepared to wear on-going fiscal risk and Wills says it understands why. These changes will protect $184 million over four years.

"We need to reassure farmers it won't impact either past tax paid or tax to be paid in the 2011-12 financial year. On that basis we accept this change.

"More generally however, we continue to prefer for a 24-month notice period instead of making the election irrevocable.

"We do appreciate Government listening to Federated Farmers when people change their farming operation to a fattening regime. Elections here will continue to have a cost-based scheme option.

"We are still trying to convince Inland Revenue to allow elections when sharemilkers move into farm ownership.

"We want sharemilkers to have the option of electing out of the herd scheme when they down-size herds ahead of buying their first farm. Given debate about the problems young farmers have getting onto the farm ownership ladder, this seems counter productive.

"Purchasers in 'associated party transactions' will be required to adopt the vendor's herd scheme election and base herd numbers. This exception was requested by Federated Farmers submission when there is a complete inter-generational change of ownership

"Unlike herd elections, associated party transactions took effect from 28 March 2012.

"While the Government has announced these changes as 'made', they in fact require amendments to the Income Tax Act. Federated Farmers will be engaging in this process," Wills says.

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