Land and Income Amendment Act 1965 (farm equalisation scheme)
Archived legislative commentary on the Land and Income Amendment Act 1965 (farm equalisation scheme) from PIB vol 21 Apr 1965.
This commentary item was published in Public Information Bulletin Volume 21, April 1965.
More about the Farm Income Equalisation Scheme
The Minister of Finance, the Hon HR Lake has announced that Government has approved, in principle, a voluntary farm income equalisation scheme. The scheme was recommended by the Agricultural Development Conference. Confirming legislation will be introduced during the next session of Parliament.
What the scheme can do
The scheme will-
- enable farmers to iron out rates of tax due to rises and falls in incomes,
- encourage farmers to put aside part of their incomes in good years and to use this money for farm development in years when farm incomes fall,
- help to remove a cause of inflation and therefore help to maintain a more steady rate of economic growth.
Scope of the scheme
The scheme will apply to the income of any farming or agricultural business carried out on land in New Zealand. It will include such businesses as-
- market gardeners,
- apiarists, and
Deposits accepted now
In anticipation of the legislation, deposits will be accepted immediately for the income year ended 31 March 1965 or equivalent balance date. Special provisions will be built into the legislation for deposits to be accepted from farmers whose financial year ended before 31 March 1965.
Main features of scheme
These are considered in the following paragraphs.
How much a farmer can deposit
Voluntary deposits of amounts up to 25 per cent of assessable farm income may be made with the local tax office. The smallest deposit that can be made is £100 unless 25 per cent of the assessable farm income is less than £100. A series of deposits may be made for an income year limited in total to 25 per cent of assessable farm income.
When can deposits be made
Deposits for an income year may be made either,
- during that year,
- up to one month after the due date for filing a tax return or within 6 months after balance date, whichever is the earlier. The Commissioner may extend this time to meet special cases.
No deposits in year of voluntary withdrawal
Deposits may not be made during the same income year in which a voluntary withdrawal has been made. However, arbitrary refunds made after the 5 year maximum period of deposit will not stop farmers from making deposits in that year.
Where to lodge deposits
Deposits should be made at the local tax office which will in turn pay them into a special account at the Reserve Bank.
No interest will be paid
No interest will be paid on deposits. They will be frozen by the Reserve Bank. This is in line with Wool Proceeds Retention Deposits and Snow Loss Reserves.
Deposits are deductible
The deposit will be deductible from the income of the year for which deposit is made.
How much can be withdrawn
In general, the smallest amount which will be refunded is £100. An exception would be when the balance of a farmer's account is less than £100. There are special rules for refunds in event of the farmer's death or his retirement from farming. These are mentioned later.
When can deposits be withdrawn
Normally a farmer may withdraw his deposit after 12 Months. However, the Commissioner may allow him to withdraw sooner if, for instance, holding the deposit caused hardship.
General rules for withdrawal
Withdrawals for an income year may be made either,
- During that year;
- Up to one month after the due date for filing a tax return or within 6 months after balance date, whichever is the earlier. The Commissioner may extend this time to meet special cases.
Refunds will be made on the "first in first out" basis.
Withdrawals are assessable income
A refund is treated as assessable income in the year for which it is made.
Refunds on retirement before farming
When a farmer retires from farming any deposits remaining in his reserve account will be refunded. These will be assessed in the year of retirement unless he elects to have them assessed wholly or partly in the year or years for which they were made.
Refunds on farmer's death
These will be made to the trustees on the same basis as refunds on retirement from farming.
Refunds after amounts deposited for 5 years
Any deposit remaining 5 years after the end of the year for which it was made will be refunded. The amount will be treated as assessable income in the income year in which the refund is made.
The local tax office will answer any inquiries about this subject.