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 A spokesman told Rural News that even though a drought hasn’t been officially declared, farmers and other affected people can approach them at any stage for the range of relief options. This includes income equalisation deposits, for which discretions are available, and assistance with the payment of tax when there is hardship.

Income equalisation sees farmers allowed to apply some income from a good year to that of bad year. This preserves cash that can be applied for drought recovery and helps average out tax rates for the year. 

“We realise farmers’ incomes can be ‘lumpy’ and this scheme is recognition of this fact. The discretions that can apply to the income equalisation rules can be useful to some farmers who are seriously affected.

“The main message though, is that affected farmers should talk to their accountants in the first instance about the range of options that might help them.”

The spokesperson says “MPI is currently briefing Inland Revenue on a regular basis so that it can be prepared for any declaration if it comes.”

Inland Revenue says the options available to farmers are the same whether or not a drought is declared. But if a medium-size adverse event is declared it allows Inland Revenue to simplify procedures.

“For example, instead of getting evidence from the taxpayer as to how they might be affected, we may just accept the taxpayer’s actual declaration. In effect we are allowed to aggregate a whole lot of taxpayers and say they are all affected by the drought. 

“For instance, if a drought was declared in South Canterbury and a farmer in that area was severely affected, Inland Revenue would take their word and action their requests.”

Inland Revenue says the declaration of a drought makes the process for farmers easier, but it doesn’t change the nature of assistance available. 

The declaration also has the effect of making Inland Revenue staff more aware of a problem in certain areas and they are likely to react more quickly and with greater sympathy.