REBECCA HARPER
A Hawke's Bay accounting firm is applying to the Inland Revenue Department (IRD) to relax rules around income equalisation and provide some relief for drought stricken farmers.
Rural accountants for WHK Coffey Davidson; Rick Cranswick, Nick Hume, and Paul Kerins want to raise awareness of the plight of farmers and
say the worst is yet to come.
The IRD could allow farmers to shift income to another taxable year by using an income equalisation deposit , but once the money was deposited, it had to stay there for a year.
Money could be withdrawn before the year was up, but only if a farmer could prove hardship.
Mr Cranswick said it was an "income smoothing mechanism," particularly as many farmers would have excess income from selling livestock they could not feed.
"What we are trying to do is persuade the IRD to reduce requirements to get money into the income equalisation scheme and back out again. Most people can't work out whether they have a profit or not - and there's no point putting the money in if you don't need to," he said.
There would be additional costs to clients for their accountant to determine whether this was the case.
"It's a headache they don't need while under severe stress," Mr Cranswick said. The firm applied to the IRD yesterday, asking it to extend the date that the deposit had to be filed, and apply for early withdrawal. Farmers in drought affected areas could then benefit from early withdrawal, such as when they needed to buy back into stock in the spring. They would like the extension to apply for the 2007 year up until March 31 2008. That provision was last put in place by the IRD during the 1998 drought.
Mr Cranswick said there was no downside for the IRD, but it would be a huge help to struggling farmers.
WHK Coffey Davidson was making the application in conjunction with other accounting firms in Hawke's Bay, and in other drought affected regions, like Gisborne. The application would ask the IRD commissioner to apply his discretion in view of the adverse conditions.
The firm also encouraged farmers affected by the drought to contact their accountants for advice. Agriculture minister Jim Anderton said the IRD had been advised of the drought and "will put its adverse events provisions in place."
This would enable farmers to extend the deadline to deposit funds from the sale of capital stock without incurring additional income tax liabilities.
