VALUATION OF LIVE-STOCK.

Manawatu Standard, Volume LX, Issue 262, 3 October 1940, Page 12

VALUATION OF LIVE-STOCK.

TAX COMMISSIONER' EXPLAINS.

The following explanation of the income tax proposals relating to live-stock has been received from the Commisisoner. of Taxes, Wellington, hv the Farmers' Union : The provisions of Section 7 of the Land and Income Tax Amendment Act, 1940. which mentions values of 19s per head for sheep, and £5 per head for cattle, appear to havo been misunderstood in many instances. It is not intended to require the adoption of these figures as standard values. The section referred to gives me power to grant some relief in cases where, on the death of a farmer or on disposal of all the stock, additional tax is or has been payable as a'result of the adoption at the commencement of liability for income tax of standard values which were at that time lower than the true values. The following examples may make the effect of the section clearer:— Commencement date: (a) 1-4-1931;

and 19s per head 4 It will be seen that in (b) the difference between standard and true values at commencement is 10s but relict is limited to the difference between the standard value and 19s. Another matter affecting life-stock valuations is often confused with Section 7. I refer to the cases of those farmers who, because the unimproved value of the land farmed was under £3OOO were previously exempt from income tax, but who are liable on income derived during the year ended March 31, 1940. The stock on hand at April 1, 1939, the beginning of the year, must be shown at true value, while the closing stock may be shown cither at true values or at standard values approximating true values. This will prevent the circumstances whidh have made the provisions of Section 7 necessary, and operate quite fairly for income tax purposes. The position then arises that the values for income tax purposes will differ from the values previously adopted for social security tax purposes, and in order to bring the two 'into line for future years, the income tax figures have to' be used for closing slock for both taxes, while the opening stock for social security must be shown at the values previously used. The result is that the social security income derived during the year ended March 31. 1940, is increased by the difference- between the old standard values and the true values. When standard values have been adopted. the Commissioner has power to require later that.true values he used and any increment is assessable income. It

may happen, however, that the standard values were, at the commencement of liability for employment tax. less than true values, making the circumstances somewhat similar to those provided for in Section 7of the Land and Income Tax Amendment Act, 1940. Persons first commencing to derive income from farming after April 1,1930, will have brought in their stock at actual cost and any increase in value since then is corroctly chargeable as income. Had true values been used instead of stundard values the increase w r ould have borne tax each year as the market, values rose. Farmers with land, the unimproved value of which is ovor £3OOO, who have adopted standard values, may continue with Ihe same value. It should be noted that the first part of this letter refers to farmers, the unimproved value of whose land is over £SOOO, while the latter part refers to those with under £3OOO,

(b) 1-4-1928. (a) (b) Per Per head head Standard values at commencemont 10 15 True values at commencement 15 25 Probate or market value as at 31-3-1939 25 30 Relief under Section 7. (a) Difference between 10s and 15s per bead (b) Difference between 15s 5