Changes to Farm House Deductions

As highlighted in previous newsletters, IRD have been looking at deductions applicable to housing for farmers and orchardists. They have recently released their decision.

Until now there has been no difference between deductions applicable to “real” farmers and those deemed to be “lifestylers”. From the 2018 tax year, there will now be a difference.

If a farmer/orchardist buys a property and the house makes up more than 20% of the value of the property, the farmer will be a “Type 2” farmer. As a Type 2 farmer, you will be not be able to claim a full deduction for rates or interest on mortgages. Those expenses and others related to the property (such as electricity for the house) will need to be apportioned between the business and the private use. Each case will vary and will depend on the facts of a particular situation.

Farmhouse

All other farmers will be deemed to be “Type 1” farmers. This is where the house value is 20% or less of the overall value of the property. In these cases, full deductions are allowed for rates and mortgage interest. When it comes to claiming things like electricity, previously farmers were allowed a “no questions asked” deduction of 25%. This was an historic deduction with no proof needed. From the 2018 year this will now be limited to 20% for Type 1 farmers and orchardists. For Type 2 farmers, the deduction is limited to their actual usage – so a calculation is needed.

In most cases (particularly in relation to farms), it will be obvious whether the property is a Type 1 or Type 2. Orchards, however may be a little different. IRD has provided some guidelines on how the difference between Type 1 and Type 2 properties should be made. If historic purchase prices are not appropriate, you are able to use rateable valuations. In examining rating valuations for orchards however, we have found them not to be particularly helpful when determining the split between the house/section and the rest of the property. In these cases, it may be that some sort of valuation is needed to determine the value of the house compared to the total value of the property. IRD have said this can be done by a real estate agent or of course a formal valuation by a registered valuer is ideal.

Proposed Changes to Tax Deductibility of Farmhouse Expenses

Proposed Changes to Tax Deductibility of Farmhouse Expenses

IRD are currently reviewing the laws around tax deductibility of farmhouse expenses. Since the 1960s, farmers and orchardists have been able to deduct 25% of farmhouse expenses without  needing to provide evidence of their business use. They have also been able to deduct 100% of rates bills and interest costs on loans.

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Kiwifruit Contractor Payments

Kiwifruit Contractor Payments

Over the last few months there have been a number of clients that have received letters from IRD in relation to payments made to labour only contractors in the kiwifruit industry. This is mainly in relation to summer and winter pruning. Generally these letters have come about because IRD are investigating a particular contractor that is possibly not doing things correctly in relation to withholding tax.

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2017 New Zealand Dairy Industry Awards

2017 New Zealand Dairy Industry Awards

Entries to the 2017 NZ Dairy Industry Awards open on 20 October 2016.

BRG proudly sponsors the New Zealand Dairy Industry Awards for the Bay of Plenty Region.

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Targeting the Cash Economy

Inland Revenue’s crackdown on ‘cashies’ continues with their focus on undeclared cash in the construction and hospitality sectors. Last year, the Auckland region saw the most activity. Inland Revenue are now widening their reach. They’ve been trying to change attitudes among tradies and subcontracting businesses and their efforts seem to be getting results.

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Trudi Ballantyne Awarded Prestigious Fellowship Award by Charted Accountants Australia & New Zealand

Our very own Trudi Ballantyne has been awarded the prestigious Fellowship Award by the Chartered Accountants governing body.

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Filing GST Returns Through Xero

Filing GST Returns Through Xero

IRD are currently running a trial to file GST returns directly through Xero to Inland Revenue.

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New Property Tax Laws

New Property Tax Laws

New tax rules now apply to residential property sales made from 1 October 2015.

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GST Christmas Draw

The winner of our 2015 Paperplus voucher for getting their GST papers into us by 15 December was RJ & KM May Ltd.

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2016 New Zealand Dairy Industry Awards

2016 New Zealand Dairy Industry Awards

Entries to the 2016 NZ Dairy Industry Awards are now open.

BRG proudly sponsors the New Zealand Dairy Industry Awards for the Bay of Plenty Region.

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