For most if something has been working well for the last 50 years there wouldn't be a great incentive to change the rules.

However, the IRD after prescribing the practice for farmer’s farmhouse expenses since the 1960s have decided in 2016 to rewrite the rules on the tax deductibility of these costs. Accordingly today they issued a draft interpretation on how certain farm costs which relate to the farmhouse (e.g. rates, insurance and Repairs and Maintenance) should be treated.

The Department's proposals are to reduce the percentage of farmhouse costs automatically regarded as business from 25% to 15%. However, where the farmhouse costs is in excess of 20% of the total farm cost the farmer will need to establish their own percentage (read an inference it will be less than 15%).

We are not convinced that the Department’s new suggested percentages has any more science behind it than the accepted practice for the last 50 years. We are also unconvinced that the small amount of revenue that may be raised based on the Department's proposed approach will come close to offsetting the compliance cost of following their proposed new rules.

IRD is seeking comments by 22 December with the new policy coming into effect from 2017/2018. We are confident IRD will get some honest feedback on their proposals.