Farmers facing higher tax bills

Farmers are expecting their tax bills to surge as rising business costs step up the annual calculation of "standard" values for livestock reports the ODT. The Government's "national standard cost values" (NSC), used by many farmers' accountants to calculate taxable income, have increased by about 30 %  for dairy cattle and 13-14% for beef cattle and sheep. M&WNZ's estimate of on-farm inflation for the year ended March 2008 hit 9.7% as the costs of producing livestock jumped. The new NSC values for farmers will hit the valuation of immature livestock still held at the end of the tax year, said rural accountant Lyall Evans, of Gisborne. "For those using NSC valuations, it will result in higher taxable income and higher tax liabilities...without any extra cash as the cash has been invested in the higher costs to produce those young animals. That, coupled with what looks like a year when sheep sale prices would be well ahead of last season, meant sheep and beef farmers needed to be preparing to make much higher tax payments, Mr Evans said. The new livestock production costs reflected what had happened on farms during the first three quarters of 2008. The falls in costs, which started to show up in the fourth quarter, would be taken into account in the 2010 NSC values. Mr Evans said low product prices and drought last season had led to many sheep farmers destocking and slashing both production and their income tax bills. But as farm incomes started to rise, they would have to plan cashflows, he said. "Many taxpayers end up with nearly two years tax payments all payable over a very short time frame."