Land and Income Tax Amendment Act (No. 2) 1974
Archived legislative commentary on the Land and Income Tax Amendment Act (No. 2) 1974 from PIB vol 78 May 1974.
This commentary item was published in Public Information Bulletin Volume 78, May 1974
Farm Income Stabilisation Scheme
On 23 March, the Minister of Agriculture and Fisheries, Hon. CJ Moyle, announced final details of the Government's plan to extend the voluntary farm income stabilisation scheme to the 1973-74 farming year. The relevant portion of the Minister's press statement is set out overleaf.
Main Features Of Scheme
The main features of this year's scheme as announced by the Minister are -
- There will be no formal target figure for the total amount of deposits to be lodged.
- Individual farmers may again make deposits of unlimited amounts.
- Farmers who made deposits under last year's scheme are asked, depending upon individual circumstances, to leave those deposits in the scheme for at least a further 12 months. Additional deposits may also be made into the scheme.
Advantages Of Making Deposits
The scheme allows farmers to even out their incomes in times of fluctuating earnings. Deposits can be made tax free in good income years and uplifted in less successful years. In this way a lower rate of tax may be payable in the year the deposit is uplifted. Worthwhile tax savings may also be achieved if the scheme is used in association with a planned programme of farm development and other farm work.
In the short term a deposit generally has a double advantage for tax purposes in that it will reduce the terminal tax for the year in respect of which the deposit is made and also usually reduce the provisional tax for the following year.
Farmers should consider these advantages in planning for the future.
Here are some further facts about this year's scheme.
As was the case with last year's scheme, provision will be made to allow deposits to be accepted from farmers who retire during the 1973-74 year or within the period allowed for making deposits in respect of that year. Farmers who make a 1974 deposit prior to retirement should advise the Department if they do not wish to have the deposit automatically refunded on retirement.
Death Of A Farmer
When a farmer dies there will also be provision to allow the trustees of his estate to make deposits for the 1973-74 year in respect of income derived to the date of death. They can also ask the Department not to make an automatic refund of 1973-74 deposits already made by the farmer before his death. Trustees may also elect to retain prior years' deposits in the scheme and carry them forward to later years.
Refunds Already Made
Deposits will be accepted for 1973-74 even though a refund of an earlier year's deposit may have already been received by the farmer in respect of the 1974 year.
Year Of Deduction
Deposits made for 1973-74 will be allowed as a deduction from taxable income for the farmer's 1974 accounting year.
Period Of Deposit
Deposits must generally remain in the scheme for a minimum period of 12 months but deposits can be uplifted anytime after this period.
The maximum period of deposit is 5 years. Early withdrawals within the 12 months minimum deposit period will be allowed in cases of hardship or where funds are required for urgent development work.
Tax Position In Year Of Refund
Refunds are assessable income in the year the application for the refund is made. However, a farmer can usually ask to have the refund treated as income of the previous year. There is a guarantee incorporated in the scheme which limits the tax payable in the year of refund to the amount of tax saving in the year of deposit.
When To Make 1974 Deposits
Deposits can be made anytime during a farmer's 1974 accounting year or within the earlier of -
- Six months after the end of the 1974 accounting year, or
- One month after the due date for filing 1974 returns.
- Deposits will also be accepted within any extended time period allowed for putting in 1974 returns.
How To Make Deposits
Pay your deposit into the local tax office. Cheques and Money Orders should be "crossed" and made payable to "Inland Revenue Department". Attach a note stating that the payment is an Income Equalisation Reserve deposit for 1973-74.
Our local tax offices will be glad to answer any questions about the scheme and you may also find it useful to discuss the matter with your own financial advisers.
The Minister's Press Statement
The Minister of Agriculture & Fisheries, Mr Moyle, confirmed that last year's voluntary farm income stabilisation scheme would be extended to the current 1973/74 farming year.
Mr Moyle said that in view of the outstanding success of last year's scheme no formal target would be set this year, but there would be no limit on the amount that an individual farmer could deposit.
(Last year farmers deposited more than $94 million against the announced target of $85 million).
"I hope that as far as possible farmers will leave deposits already lodged for at least a further 12 months. I am confident that many farmers are willing to do this and also to make an additional deposit out of this year's income, although individual circumstances will vary considerably," he said.
Farmers and accountants had realised the considerable benefits that could be made by spreading fluctuating incomes. He urged farmers to make maximum use of the scheme in their own and in the national interest.
By supporting the scheme, pressure on supplies of farm inputs and other items in short supply would be reduced, he said. As well as the stabilising effect that could be achieved, farmers would also be protecting themselves in the future when incomes might well be lower.
The Minister re-emphasised that money later withdrawn from the Scheme for development purposes remained tax deductible.