The Ministry of Agriculture has recently declared a drought for Waikato and South Auckland. A similar declaration was made in Northland and North Auckland in February as well. This classification recognises the prolonged, extreme weather as an adverse event for the primary sector.
As a result of this classification, the IRD has made discretionary relief available to provide assistance to those who are affected by the drought. This relief comes in the form of Income Equalisation Scheme late deposits and early withdrawals for farmers.
This email is being sent to you as you are noted as a farmer in our database. It only affects farmers and growers in the Northland, North Auckland, South Auckland, Waikato regions and the Gisborne, Manawatu, Rangitikei and Tararua districts. If you do not farm in these regions or districts, this information is not applicable to you.
In the event that you have been materially affected financially by the drought conditions, IRD are allowing late deposits into the Income Equalisation Scheme up to 30th April 2020 even where the 2019 tax return has been filed. To qualify for a late deposit, farmers must provide evidence of how they were significantly affected by the drought. Further, if you have been materially affected by the drought the IRD will also allow early withdrawals from the scheme before the normal 12 months. Materially affected means that you are facing some level of financial difficulty (perhaps having to extend an overdraft or borrow to get through) or that you are incurring extra expenditure as a result of the drought and this needs to be demonstrated to IRD.
We see the application of this discretion being of most value to farmers who are exposed to IRD use of money interest (UOMI) in their 2019 tax returns and those expecting a significant decrease in profits for the 2019/2020 tax year.
If you think you might fall within the hardship rules please give us a call to discuss.
We will also shortly be reviewing farming clients 2019 tax returns where use of money interest has been incurred and will be in contact with those we think may be a benefit from the Income Equalisation Scheme.