Inland Revenue has proposed retaining the scheme by amending an existing law and including improved aspects of the scheme.
An IRD spokesman said a review of the scheme’s provisions found it is inflexible when compared to corresponding schemes.
“As a result, very few farmers have used the AES, instead preferring to make income equalisation deposits into the main scheme to take advantage of its more flexible terms for deposits and withdrawals.”
IRD said proposed changes would allow the amalgamation of those using the scheme along with some minor clarifications to the mechanics of the new income equalisation scheme for deposits and withdrawals related to the replacement of livestock following an adverse event.
Chartered Accountants Australia New Zealand tax and financial services leader John Cuthbertson said the original scheme should be retained because of an expected surge in interest caused by Mycoplasma bovis.
“Rather than repealing the scheme and transferring taxpayers to the main income equalisation scheme as proposed, we believe the Adverse Events Scheme should be retained and enhanced.”
Cuthbertson said the low uptake was likely to lift if feedback from accountants is any indication.
It is fit for purpose.
“In the case of M bovis and similar events, affected farmers could likely earn significant income from forced stock sale or culling yet still be required to repurchase, often more expensive, healthy stock in the following year.
“The clear benefits of the scheme are the ability to earn interest over a short period to account for stock supply and price fluctuations and the certainty of early withdrawal from the scheme, unlike the main income scheme where deposits have a minimum 12-month term.”
If the scheme is repealed the replacement should be amended to ensure fairness for those transferring or changes introduced to the livestock valuation rules to deal with livestock replacement after an adverse event.
