TAX ON FARMERS’ INCOMES

Southland Times, Issue 24235, 19 September 1940, Page 8

TAX ON FARMERS’ INCOMES

EFFECTS OF RECENT CHANGES VALUATIONS OF LIVE STOCK

The effect on farmers of recent changes in the income tax law, particularly in values of live-stock, and the effect of these changes on farmers’ payments of social security and national security charges are explained by the Hon. Adam Hamilton, Leader - of tire Opposition in a statement he made yesterday. He says that he has been frequently asked for a simple explanation of the position and that although questions have been asked and answered in the House of Representatives, the changes have not been clearlv understood. Section 7 of the Land and Income Tax Amendment Act 1940 deals with standard values for farmers’ live-stock, and suggests the following values: Sheep. 19/-; cattle, £5. This section applies only (a) to those farmers who sell out, thereby bringing the market value of their stock into their income tax returns for that year; or to (b) the farmer who dies, and whose stock is valued on a market value basis. “This section affords a good measure of relief to either of these classes of farmers who have adopted in the past low stock values, in that the commissioner can allow them to adjust their values to the above standard at the beginning of that income tax year,” states Mr Hamilton. “This would have the effect of materially reducing the income tax for the year in question.” “Section 7 affects only farmers who have been paying income tax for a number of years—farmers whose unimproved value of land held is over £3OOO. This class of farmer is not, however, obliged to alter his present stock values unless he wishes to do so. If he raises his stock values at the present time, he may be doing himself an injustice by having to pay income tax and social security and national security taxes on a higher level than at normal times. He may, therefore, be better advised during these abnormal times to adhere to his present values. MARKET VALUES “Farmers whose property is of an unimproved value of under £3OOO are liable for income tax this year for the first time. The commissioner is insisting that they adopt market values for their stock in their first returns. The [ values may be even higher than are quoted in Section 7 of the 1940 Amendment Act. This adoption of the market value at the beginning is not unreasonable and may ultimately be as much in the farmer’s interests as against his interests.

“With the farmer who was not previously subject to income tax a difficulty arises with the returns that he had previously been making for social security tax. In his social security tax returns he adopted his own stock values, some of which might have been considerably lower than market value. The difficulty now arises when he is compelled to raise the values in his social security returns to the same as the values in his new income tax returns. This materially increases, in an artificial way, the amount he will have to pay for both social security and national security tax on this year’s income. This is no doubt a sore point. He is now doubly affected, because the national security tax has been imposed since he first established his values, which must now be increased at the command of the Commissioner of Taxes. It would seem only meagre justice, seeing that these values are ordered to be brought into line, that the taxpayer concerned should be allowed the alternative of adjusting his values at the date when he first established them, and paying any increase of social security tax involved at the rate of tax in existence during that year. This is apart from the fact that he is paying tax on income earned before the national security tax was imposed.”