Partner at Crowe HorwathThe decision about whether or not to move surplus stock into the herd scheme this year will need to be discussed with your accountant.
Last week, the Inland Revenue Department released the 2017 National Average Market Values for livestock for those farmers who have elected to usethe Herd Scheme to value their livestock.
These values, set by Inland Revenue each year, are an average of livestock values for the whole country at the end of April and are released in the middle of May.
The values this year reflect the strong prices that farmers were paying for their livestock. As a result, there have been significant increases in almost all types of livestock.
For example, mixed age cows have risen to $1431 - a 12.4 per cent increase on last year's value of $1273. Similarly, rising two year steers have risen to $1325. The beef cattle values are at their highest values ever.
Sheep have also experienced strong increases in values. Two tooth ewes are now $150 and Mixed Age Ewes $131, showing percentage increases of 12 per cent on last year's values. Sheep have recovered to levels last seen in the 2012 year.
Dairy cattle and deer values have also risen significantly, with young female stock showing the greatest percentage increases. Rising one year heifers have increased by 55 per cent to $819 and rising one year hinds increased to $303, a 36 per cent increase.
The gains in value for those with stock in the Herd Scheme will be treated as capital rather than assessable income, as these livestock are deemed to be a capital asset. Assessable income will only arise where there has been an increase in the numbers in each class of livestock.
The decision about whether or not to move surplus stock into the herd scheme this year will need to be discussed with your accountant. There is no right or wrong answer to this question as each farmer's circumstances are different.
However, it would be fair to say that moving stock into the herd scheme in years of high values may not be the best decision. Those looking to exit farming in the shorter term may decide to move some stock into the herd scheme as a means of spreading tax obligations over a number of years.
This information is general in nature and readers should seek specialist advice before making financial decisions.
