'Grave concerns' over parts of Winston Peters' $5 million tax breaks for good-looking horses

New Zealand First leader Winston Peters says better tax rules will encourage new investment in bloodstock breeding. Photo / Mark Mitchell

Just a handful of "standout" racehorses a year would qualify for Deputy Prime Minister Winston Peters' $4.8 million tax break, according to the racing industry.

Some are concerned that so few horses would meet the tax deduction threshold and have called for a rethink on what constitutes a "standout yearling".

According to Budget documents from Treasury, a "standout yearling" is identified by the "virtue of its bloodlines, looks and racing potential".

In Budget 2018, Peters earmarked $4.8 million over the next four years for tax deductions to be claimed for the costs of high-quality horses acquired with the intention to breed.

To qualify for the tax deduction, the horse would need to be worth at least $402,000 and must have been bought by a New Zealand resident who was a first-time horse breeding investor.

According to data from Karaka horse sales, – the biggest race and breeding horse sale of the year – which was read to MPs at this morning's Finance and Expenditure select committee, the number of horses that would have met that threshold this year was just two.

Chapman Tripp Partner David Patterson, who was representing the racing bloodstock industry at the committee hearing, said the industry's concern was that the legislation, as proposed, "may not deliver the intended benefit to the industry."

He said the number of horses that should qualify for the tax deduction needs to be closer to 20 or 30, not a just a few.

"We want to make sure policy delivers the [Deputy Prime] Minister's intention. At the moment, we're not 100 per cent sure it does."

He said currently, breeding investors would have to overcome "a "monumental threshold" to be able to qualify for the tax deduction.

In its submission to the Finance and Expenditure Select Committee, the New Zealand Thoroughbred Breeders' Association said it had "grave concerns" over the current formula of calculating what constitutes a "standout yearling".

"We feel the lowering of the threshold would be advantageous in encouraging new investment."

Earlier this month, Cabinet approved the final design of the bloodstock rules.
In a statement, Peters said quality breeding was the "lifeblood" of the New Zealand racing industry.

"Better tax rules will encourage new investment in bloodstock breeding, and affirms the Government's commitment to New Zealand's racing industry to reach its full potential."

The legislation putting the tax deduction into effect would be enacted in early 2019.

It would have a retrospective start date of 1 January 2019, according to Peters.

"This means it will apply retrospectively to yearlings acquired at the New Zealand National Yearling sales series at Karaka in January 2019."