Rural Update March 2019
This month is traditionally the busiest month of the year for accountants with the deadline for filing 2018 tax returns falling on the 31st of March. This also coincides with the last month of the financial year for most businesses which is also a busy time, and in addition, this year there is a significant change coming up in the way that businesses have to report their employees’ earnings and other details to IRD - this is called Payday Filing.
By now all employers should be aware of Payday Filing which comes into effect on the 1st of April. All employers should now be registered for Payday Filing and have adequate systems in place to deal with the new requirements. In a nutshell, from April 1, whenever an employee gets paid, employers must notify the IRD within two working days if they file their payroll information electronically, or within ten days if the payroll information is filed manually on paper forms. Many employers that we are dealing with are signing up with payroll providers and intermediaries such as PaySauce, Xero Payroll, MYOB Payroll (or one of the many others that exist) or they are simply contracting out the work to bookkeepers and accountants.
It should be remembered that in 1986 there was a more substantial change to our tax system when GST came in (and we got through that!), and once Payday filing settles down it will become normal practice.
The farming season was going very well for most farming types, up until the end of January with good commodity prices and farms with plenty of grass and supplements on hand. The last month or so however has seen particularly dry weather, and each farmer now needs to have their own plan that suits their current feed and stocking position. Meat works are now particularly busy and beef prices have come down by approximately 50 cents a kg for cattle, which equates to around $150 less that a farmer receives for a bull or a steer, or approximately $100 less for a boner cow. Prices are still at historically good levels however, and if farmers are feeling the pinch then it is still the right decision to destock, with not a lot of rain forecast on the horizon. A lot of dairy farmers have moved to once a day milking to deal with the dry weather.
Our advice, as always, is to talk to your consultant and farm advisors and chat to the neighbours about what they are doing. Everyone is feeling the heat.
The Farmers Weekly and Country News are full of articles regarding more regulations for farmers to deal with, compliance issues, healthy rivers and capital gains tax. Some of these matters will have to be addressed in time. We note that Federated Farmers are calling for stock agent companies to be regulated and we generally support this, as like lawyers, accountants and real estate agents, they do handle a lot of money and should be subject to money handling requirements. The large number of (perfectly honest) livestock agents that we deal with would, I’m sure, support some sort of regulation, as it gives them some guidance to work with as well.
Capital Gains Tax
We believe that the proposals on capital gains tax will get substantially ‘watered down’ and many organisations will be making appropriate submissions to the government. Some form of capital gains tax is inevitable, but in the medium term we do not see a lot of potential for an increase in rural land values, as these are currently at historically high levels anyway. As these are the values which will be used as a base to measure future capital gains we generally don’t see a big issue for current farm owners. But watch this space…
Article by Cheyne Waldron
Bailey Ingham Ltd