The agricultural industry places unique demands on farmers, and keeping up-to-date with accounting and tax rules and regulations can be time-consuming. We’ve compiled a list of tips for making your farm accounting easier.
- Regardless of whether your end of year balance date is 31st March, 31st May or 30th June, take a physical stocktake of your livestock numbers as at that balance date. Remember to include any stock leased out, and reconcile the count with your herd records.
- If you have plans to sell a significant amount of livestock around the time of your balance date, check with your accountant first regarding possible benefits of finalising the deal after your balance date. Any taxable income on the stock sold will be deferred to the next financial year, so the tax won’t be due for an additional 12 months.
- Similarly, be aware that large expense items can have an effect on your taxable income. Any major purchases made before your balance date will result in the tax deduction occurring in the current financial year. Conversely, large purchases made after your balance date will result in delaying the tax deduction until the next financial year.
- Excise duty can be claimed for the cost of petrol, LPG and CNG used in agricultural vehicles and machinery, including motorbikes, quad bikes, petrol tractors, chainsaws, generators and gas bottles for docking. To claim a refund you must fill out form MR70, available online at NZ Transport Agency.
- Farmers may be entitled to claim a larger deduction than the general 25% of dwelling costs like power and repairs and maintenance where there is a sufficient connection to earning income. We recommend reviewing your household expenses to ensure your business-related claims are complete and accurate.
- If a vehicle is used for both farming and private usage then an apportionment needs to be made between the farming usage which is deductible for tax purposes and private usage which is not tax deductible. In this case a log book should be maintained for a representative 3-month period illustrating farming and private travel, from which the percentage of farming travel can be calculated and claimed.
- Inland Revenue publishes a guide to the GST and PAYE obligations of dairy farmers. It answers some of the questions most commonly-asked by dairy farmers, such as how much GST can be claimed on electricity, farm bikes and clothing, and the rules on PAYE deductions on employee accommodation and agricultural contractors.
- Thorough, accurate record keeping can help your farming operation to run more smoothly. We recommend balancing your accounts regularly, processing expense claims regularly and coding receipts as you go. This all helps to simplify the year-end process and improve accuracy. There are several excellent accounting software packages designed for farmers, such as Xero, Figured, iAgri, Quickbooks and Cashmanager Rural. Research which system will suit you best, and if possible take advantage of free trials. The right software can save you more in time than it costs you in monthly fees.
Our Kumeu and Helensville Director Mark Foster is an expert in Farm Accounting. If you would like to discuss this article or your farming operation please contact Mark at firstname.lastname@example.org or phone (09) 420 7957.