While some of us have been basking in this unusually warm and pleasant weather, it has been more troublesome for our farming communities.
In response to this the Government recently confirmed tax relief measures will be extended to farmers in drought areas.
The drought has been classed as a medium-scale adverse event across Taranaki, parts of Manawatu-Whanganui and Wellington, and the Grey and Buller districts of the South Island’s West Coast. Local authorities affected by the drought classification are: Stratford, New Plymouth, South Taranaki, Whanganui, Rangitikei, Manawatu, Palmerston North, Horowhenua, Kapiti Coast, Upper Hutt, Porirua, Wellington, Lower Hutt, Grey and Buller.
This allows government agencies to step up with additional support for farmers and growers in affected areas.
The tax rules allow farmers affected by certain conditions to make payments into what is known as an income equalization account. A person who makes such a deposit is allowed a deduction against income in the corresponding income year to which the deposit relates. Which in turn reduces their taxable income. A refund of theses deposited funds are assessable in the year of refund. The recent announcement means that farmers in drought areas can make late income equalisation deposits for the 2016-2017 income tax year. They will also be able to apply for early refunds. This allows farmers to smooth out fluctuations in their income from year to year to help with the current situation.
If you or your clients need assistance with this don't hesitate to give us a call.