1 IR 252 July 2006 Dairy farming A guide to the GST and PAYE obligations of dairy farmers
2 3 Dairy farming This guide answers some of the common questions dairy farmers ask about GST and PAYE. For more detailed information refer to the following booklets: First-time employer s guide (IR 333) Employer s guide (IR 335) GST do you need to register? (IR 365) GST guide (IR 375) Smart business (IR 320) Weekly and fortnightly PAYE deduction tables (IR 340) Four-weekly and monthly PAYE deduction tables (IR 341) You can get these from or order them through INFOexpress see page 10. Visit our website for services and information. Go to: Get it done online to file returns, register for services and access account information Work it out to calculate income tax, PAYE, entitlements, repayments and due dates Forms and guides You can also check out our newsletters and bulletins, and have your say on items for public consultation.
3 4 DAIRY FARMING GUIDE GST on farm expenses Dogs You can claim 100% of the GST on all working dog costs such as the purchase price, food, registration, vet bills and kennels. You can t claim GST on dogs purchased from a person who isn t registered for GST. Electricity If your full-time occupation is farming, you can claim 25% of the GST on your domestic power bill. You can claim 100% of the GST on your milking shed and farm power. Farm bike If you own the farm bike and pay all expenses you can claim 100% of the GST on the capital and running costs (petrol, oil and repairs). If you own the farm bike and the farm owner pays all the running costs, you can only claim GST on the capital cost of the bike. If the farm owner provides the bike and you pay all the running costs, you can only claim GST on the running costs. Farm cottages You can t claim GST on expenses relating to your farm cottage (for example, repairs, maintenance, paint/paper, electrical and building work) as they are an exempt supply. Goods taken/purchased for private use You can t claim GST on goods and services purchased for you or your family s private use such as food and clothing. If you purchase livestock as part of your business and then take it for private use, you need to make an adjustment for GST.
4 5 For example, if you kill a beast for your own use, you must account for one-ninth of its value in Box 9 of your GST return. Livestock purchased from a non-registered person You can t claim GST on livestock purchased from a person who isn t registered for GST. Primary produce can t be classified as secondhand goods. Newspaper You can claim up to 50% of the GST on your newspaper subscription. Phone costs If your full-time occupation is farming, you can claim 100% of the GST on your: phone line rental phone line connection cost, and business-related toll calls. You can t claim on private toll calls, so it s a good idea to highlight business toll calls on your phone account. Note If you have a farm cottage, you can claim the GST on any business-related phone calls your employee makes. If you have a mobile phone the same conditions apply for claiming GST as above. Shed rubberware and detergent You can claim 100% of the GST on all milking shed-related expenses. Shifting costs farm to farm You can claim 100% of the GST on the cost of moving your farm stock and machinery from farm to farm. All other expenditure related to the shift is private and not claimable.
5 6 DAIRY FARMING GUIDE Wet weather gear and protective clothing You can claim 100% of the GST on wet weather gear and protective clothing, for example, overalls and gumboots. Other clothing, such as jeans, T-shirts etc, are a private expense and not claimable. PAYE deductions Accommodation provided to employee Accommodation provided to an employee is a benefit and therefore taxable. You need to add the value of the benefit to the wages each pay period and deduct PAYE from the total. If a sharemilker s employee lives in a house on the farm owner s property, the value of the accommodation must be included as gross earnings, even though the supply of accommodation is not directly between the employer and employee. Farm cottage To calculate the value of the benefit you need to take into account what is being supplied, for example, if it s a free house, take into account the average market rent in the area, the location and condition of the house. Your home or outside room To calculate the value of the benefit you need to take into account what is being supplied, for example, meals, own room, power and/or phone.
6 7 Note Include the value of the accommodation (including free board) in the gross earnings when you complete your Employer monthly schedule (IR 348). Agricultural contractors Agricultural contractors include workers contracted for maintenance, development or any other work on farming or agricultural land. Unless a contractor provides you with a current Certificate of exemption (IR 331) you must deduct withholding tax at a rate of 15%. The fact that a person can be registered for GST makes no difference. If the contractor does not have an IR 331, they will need to complete a Tax code declaration (IR 330). You should pay the withholding tax to us by the 20th of the following month, along with any other PAYE. When you are shown an IR 331 check that the work the person is doing for you is the same as the work shown on the certificate. For example, if the certificate gives an exemption from modelling income, and you have hired them to bale your hay, the payments you make are not exempt and you re required to deduct withholding tax. Casual agricultural employees Casual agricultural employees are people you engage to do casual seasonal agricultural work on a day-to-day basis for up to three months. They are taxed through the PAYE system at a flat rate using the tax code CAE (casual agricultural employee) on the IR 330 form.
7 8 DAIRY FARMING GUIDE Contract milkers If you take on a contract milker you need to have a written contract in place. You also need to ensure that the contract meets the criteria for the milker to be self-employed. If it doesn t you may find the contract milker is an employee and you re required to deduct PAYE. Relief milkers A relief milker is generally an employee and therefore you re required to deduct PAYE from their wages. You can use the CAE tax code and deduct PAYE at a flat rate. The employee is required to complete an IR 330 showing CAE as the tax code. For the rate see the current Weekly and fortnightly PAYE deduction tables (IR 340) or the Four weekly and monthly PAYE deduction tables (IR 341). You can get these from or by calling INFOexpress (see page 10). If you re not sure whether they are an employee or a self-employed contractor, see our leaflet Self-employed or an employee? (IR 336). You can get this from or by calling INFOexpress (see page 10). Income tax When filing your return, instead of sending in your financial records to determine your income tax liability, you can prepare a summary of your income and expenses using the IR 3F, a form for farming income and expenses. Note Maintaining accurate records will reduce the time you and your accountant take to complete your end-of-year accounts.
8 9 How to contact us For assistance with any business tax enquiries please call us on the following numbers: Employer issues GST Income tax and general enquiries Child support Overdue tax and returns Business tax information service and Mäori community officers We offer a free business tax information service to new businesses and organisations to help them meet their tax responsibilities. This service is available to both individuals and groups. Most of our offices also have a Mäori community officer who can assist Mäori organisations and individuals with their tax responsibilities. Our advisors will tell you: which taxes you need to know about what records you need to keep how to complete your tax returns (for example, GST and employer returns) when to file returns and make payments. They can also arrange to meet you at a place that s convenient for you it doesn t have to be in one of our offices. To find out more about these services or to arrange an appointment, go to or call us on
9 10 DAIRY FARMING GUIDE INFOexpress INFOexpress is our automated phone service. You can use INFOexpress to: order Inland Revenue forms, guides and taxpacks get up-to-date account balances and request statements for income tax, GST, PAYE deductions, student loans and child support follow the progress of your tax refund calculate your tax or work out your rebate claim entitlements find out about family assistance entitlements request a summary of earnings or a personal tax summary find out about student loan interest write-offs. You can order stationery (forms and guides) and request personal tax summaries using our interactive voice response system (IVR). This lets you use your voice instead of keying in numbers on your phone keypad. For all other services you ll need to use a touch tone phone and key in numbers for options. Remember to have your IRD number handy. It s also helpful if you know the number or name of any forms or booklets you re ordering. For personal information, such as account balances, you ll also need an INFOexpress PIN. You can get a PIN by calling and following the step-by-step instructions.
10 11 You can call INFOexpress for the following services between 6 am and 12 midnight, seven days a week. Forms and guides (IVR) Request a personal tax summary (IVR) Request a taxpack Request a summary of earnings Information on interest-free student loans Apply for other student loan interest write-offs All other services Privacy Act 1993 Meeting your tax obligations involves giving accurate information to Inland Revenue. We ask you for information so we can assess your liabilities and entitlements under the Acts we administer. You must, by law, give us this information. Penalties may apply if you do not. We may exchange information about you with the Ministry of Social Development, the Ministry of Justice, the Department of Labour, the Ministry of Education, the Accident Compensation Corporation or their contracted agencies. Information may be provided to overseas countries with which New Zealand has an information supply agreement. Inland Revenue also has an agreement to supply information to Statistics New Zealand for statistical purposes only. You may ask to see the personal information we hold about you by calling us on Unless we have a lawful reason for withholding the information, we will show it to you and correct any errors.
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