Opportunity to lower Tax Burden on Harvesting Income

Some solid detective work by Hew McKellar, President of the Western Farm Co-operative Forestry Company Ltd and Hunterville-based farm forester, has revealed an important opportunity for some forest owners to spread their harvesting revenue over five years.

Previously there was confusion relating to an error in Inland Revenue's guide notes. The activity of "growing trees for production of timber" was (incorrectly) included in a list of activities that do not quality for the Income Equalisation Account Scheme. We understand that Inland Revenue is correcting this error.

However, the scheme is only available to taxpayers who are not companies, public authorities, Maori authorities or unincorporated bodies who derive income from forestry.

There is a five year limit on the length of time that funds can be in an income equalisation account. After the five-year limit, any deposit in the person's income equalisation account is refunded to the person.

If you would like more information on this matter, and prior to taking any action relating to this information, we suggest you contact your tax advisor, accountant or the Inland Revenue.