30 Mar 2012

Claim tax changes will hurt young farmers

6:53 am on 30 March 2012

An agricultural tax specialist says a Government crackdown on a livestock tax loophole will have a negative impact on the next generation of farmers.

Charles Rau of BDO Accounting is speaking in response to a Government decision which stops farmers switching from one livestock valuation scheme to the other.

Previously farmers could alternate between a herd valuation scheme and a national standard cost scheme, which effectively meant market valuations could go untaxed.

Mr Rau says New Zealand has an ageing farmer workforce, and the increasing price of stock and land is locking younger farmers out of the industry.

He says the new rules will hit young farmers with another expense.

Mr Rau says often when young farmers bought into farms under the old legislation, they had their livestock valued under the national standard cost scheme because the cost was a lower value, which resulted in lower tax during the initial few years, which is when they are struggling.

He says under the new rules if farmers buy livestock off their parents, unless they buy 100% of the farm and 100% of the livestock, they will have to remain in the herd scheme if their parents were in the herd scheme.

Mr Rau says that will remove the choice of them using a cost based scheme.

He says the new legislation should include an exemption for young farmers in that situation.