Howdy, fellow Kiwi landowners! 🌱 Ever felt like the only thing harder than getting through a muddy paddock is sorting out your farm’s finances? You’re not alone. Here in Aotearoa, farming is so much more than a job; it’s our identity. But behind the scenes, there’s a secret ingredient to a successful farm: accounting.
Whether you’ve got a massive commercial farm or a small lifestyle block, understanding the money side of things and keeping the IRD happy is a must. This guide will walk you through the nitty-gritty of farm accounting in New Zealand, but in a way that doesn’t feel like a lecture. 😉
1. Farming as a Business 💼
First things first, the IRD sees your farm not just as a lifestyle but as a bona fide business. It doesn’t matter if you’re a sole trader, part of a partnership, a company, or a trust—you’ve got to declare your income and track your expenses properly. Choosing the right structure is a big deal, so it’s always a good idea to chat with an accountant about what’s best for you and your whānau.
2. What Can You Claim? 💰
Running a farm costs a heap, but thankfully, the IRD lets you deduct business expenses from your taxable income. The golden rule is: keep those records! Invoices, receipts, everything. If it’s a legitimate farm cost, it’s probably claimable.
Here’s a quick look at some common expenses:
- Farm stuff: Livestock, feed, vet bills, chemicals, fertilisers, and seeds.
- Maintenance: Fixing fences, sheds, and water systems.
- Vehicles: Fuel, repairs, and depreciation on your farm truck or tractor.
- People: Wages for your team or contractors.
- Admin: Accounting and legal fees, farm consultants, and your farm’s internet or phone.
- Assets: Depreciation on machinery and farm buildings.
Just remember, if you use something for both personal and farm purposes (like your ute), you have to split the costs. Don’t try to claim your trip to the bach! 🏖️
3. Special Farming Tax Tricks ✨
Farming is unique, and the IRD knows it. That’s why there are a few special tax rules to help you out.
A. The Income Equalisation Scheme
This is a lifesaver for those years with crazy good harvests or high payouts. You can stash some of that extra cash into an IRD-managed account. Then, when you have a lean year, you can pull the money out. This stops you from getting hit with a massive tax bill all at once. It’s like a tax piggy bank for a rainy day! 🐷
B. Spreading Income
If you have a big sale, like selling off a chunk of your herd or your whole farm, you don’t have to pay all the tax in one year. The IRD lets you “spread” that income over a few years so you don’t get bumped into a higher tax bracket.
C. Livestock Valuation
How you value your animals matters a lot. You can use the Herd Scheme, which is a set value from the IRD and is good for long-term farmers. Or, you can use the National Standard Cost (NSC), which is based on your actual costs. Talk to your accountant to figure out which one saves you the most money.
4. GST for Farmers 📈
If your farm’s turnover is over $60,000 a year, you need to register for GST. Most things you buy and sell will have GST, but there are some special rules:
- Zero-rated sales: Things like livestock exports and some land sales don’t have GST added to them.
- GST on assets: You can claim the GST back on big purchases like a new tractor or quad bike, as long as it’s for the farm.
You have to file your GST returns regularly and keep all your receipts. Some farmers do it based on when they get paid (payments basis), while others do it based on when they send an invoice (invoice basis).
5. Lifestyle Blocks: Is It a Business or a Hobby? 🤔
Got a small block and a few alpacas? The IRD wants to know if you’re a business or just have an expensive hobby. The key is intent to make a profit.
How to tell if you’re a business:
- You’re actually trying to make money (and have a plan to do it).
- You keep good records, like a proper business.
- You’re actively selling produce, eggs, or animals.
If you just have a few chickens for your own eggs, that’s a hobby. If you’re selling dozens of eggs at the local market and have a budget, that’s probably a business. Trying to claim expenses for a hobby is a big no-no with the IRD! 🚩
6. Don’t Get Caught Out 🕵️
The IRD expects you to play fair. This means:
- Keeping your records for at least 7 years.
- Filing your tax and GST returns on time.
- Not claiming private stuff as a business expense.
- Not “forgetting” to declare cash sales.
The IRD is getting smarter, so it’s super important to keep good records. That mileage log or receipts for your fencing supplies could save you a lot of grief.
7. Find a Good Accountant 🤝
Seriously, a rural-focused accountant is your best friend. They’re not just for doing your taxes! They can help you:
- Pick the right business structure.
- Deal with all those complicated tax rules.
- Make sure you’re getting all the tax breaks you deserve.
- Help you plan for the future, like selling the farm or passing it on to the next generation.
If you’re unsure whether your lifestyle block is a business, an accountant can help you figure it out and get your ducks in a row.
8. Tech is Your Friend 💻
Forget paper receipts and spreadsheets! Nowadays, there’s awesome software like Xero, Figured, and Cashmanager RURAL that can link your farm’s financial data to things like your milk production or stock numbers. . This gives you a real-time view of your farm’s finances, making it easier to make smart decisions and stay on top of your game.
The Final Word
Farming is a tough and rewarding gig, and a little bit of accounting savvy goes a long way. Whether you’re running a massive sheep station or have a few pet alpacas on your lifestyle block, treating your land like a business is the key to success.
So, team up with a good accountant, keep those records organised, and use the right tools. By doing so, you’ll not only stay on the right side of the IRD but also set your farm up to thrive! 🌾