As drought grips much of the North Island, farmers are being urged to start thinking about using some of the tax relief measures available to cope with the business stress

Federated Farmers president Bruce Wills is urging all farmers in drought zones to talk to their accountants following the announcement that Inland Revenue will exercise its income equalisation discretions to help affected famers meet their tax obligations.

Drought was declared in Northland on Wednesday and is likely to be declared in much of the upper North Island over the next few days.

"We are exercising discretion to allow late deposits and early withdrawal from the income equalisation scheme," said the IRD.

“This measure has been announced by Inland Revenue for Northland farmers, but I urge all farmers in official drought areas to talk to their accountants about this,” Wills said.

“Just because we are having a hard time does not mean we can avoid tax, but if we address this now, farmers in a tight spot now may be able to defer deposits for a couple of months when they will hopefully be in a better cash-flow situation.

“Having this scheme available can be a good tool for farmers, particularly at this time of volatile market prices for primary produce.

“My advice is to go to and have a look, then talk it over with your accountant,” Wills said.

The Farmers’ Income Equalisation scheme provides a mechanism by which farmers can smooth the level of their taxable income. The smoothing is achieved by the fact that deposits into the scheme are tax deductible while refunds from the scheme are taxable. 

Eligible taxpayers can deposit money into the schemes in years in which their taxable incomes and marginal tax rates are high and withdraw it in years in which their incomes and marginal tax rates are lower.


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