29 Mar 2012

KPMG says changes to livestock tax go too far

4:01 pm on 29 March 2012

Accounting firm KPMG supports the Government's decision to tighten up a livestock tax loophole used by some farmers, but says the changes have retrospective implications and go too far.

The Government has announced that farmers can no longer elect to switch from one livestock valuation scheme to the other.

Previously, farmers could choose to value livestock under the herd valuation scheme or the national standard cost scheme and change schemes at will.

The Government says the switching meant market valuations could go untaxed, and lower valuations could earn tax deductions.

It signalled the changes in August last year and on Wednesday announced that all switches to the herd scheme are now irrevocable.

A tax partner at KPMG, Rob Braithwaite, says that means any switches made by farmers since that time are void.

Mr Braithwaite says the change will only affect the tax return that they file for the future.

"They will still be able to comply, it's really a matter of what they thought they had as an option, they no longer have."

Mr Braithwaite says the Government signalled that it was looking to probably change the rules in August 2011, but when it did that it said it would consider making this an irrevocable election and other options would be considered.

"One of those options was changes, but extending out the notice period to a three or four-year period. That option would have actually fixed the problem, but would have still left some flexibility for farming taxpayers," he says.