RURAL INCOME-TAX.

New Zealand Journal of Agriculture, Volume XVIII, Issue 5, 20 May 1919, Page 288

RURAL INCOME-TAX.

SPECIMEN RETURN FOR DAIRY-FARMERS.

By

A. D. PARK, A.I.A.N.Z.,

Accountant to the Department.

Section 85 of the Land and Income Tax Act, 1916, sets out the items deemed to be comprised in the term “ assessable income,” and, inter alia, includes, under subsection (d), “All profits or gains derived from the use or occupation of land, or the extraction, removal, or sale of minerals, timber, or flax, whether by the owner of the land or by any other person." This clause brings into consideration as assessable the income'derived from land by a farmer. It is not necessary for the person deriving the income to own the land, neither is it necessary for the products of the land to be sold for assessable income to be charged.

Subsection (c) includes, “ All profits or gains derived from the sale or disposition of land or any interest therein, if the business of the taxpayer comprises dealing in such property, or if the property was acquired for the purpose of selling or otherwise disposing of it at a profit.” This clause is intended to cover the buying, selling, or exchanging of freehold or leasehold interest in land by means of which profit is made. It would not be applicable to the ordinary bona fide farmer who disposes of land at a profit , in an isolated transaction, but should it turn out that the land in question, even if farmed, was originally bought by the farmer as a speculation, then the profit made on the sale would be assessable.

RETURNS OF INCOME.

Returns of-income are required to be furnished annually on or before 1st June by all persons in business and by all farmers, irrespective of the amount of income derived by them, and by all other persons whose income exceeds the sum of £250. Returns should be made up to 31st March, but taxpayers may with the approval of the Commissioner of Taxes compile their return to a date other than 31st March if found to be more suitable. In such cases the return should be furnished as early as possible after the date the taxpayer closes his books forbalancing purposes.

The return should show the exact income and expenditure for the year under the various headings set out in the form, and the numbers and values of live-stock on hand at the beginning and the end of the year ; also farm-produce (if any). In furnishing a return for any year the values entered for live-stock and produce at the commencement of the year must in all cases agree with the values entered in the previous year's return prepared at the expiry of that year. It is advisable for farmers to adopt a reasonable standard value for their live-stock and adhere to that value in rendering returns for income-tax. Unless this is done it is quite possible that a taxpayer may be levied with tax on income which is not realized.

If no return of income is furnished by a taxpayer, or if an estimated or incomplete return is furnished, an assessment is made by the Tax Department on an amount' which is considered by it fair and reasonable. The Act provides that a notice of assessment must be sent to all taxpayers, so that a taxpayer who is thus assessed in default of a return, or on account of an unsatisfactory return, is given the opportunity if he is dissatisfied with the assessment of furnishing a proper return and having, if his case warrants it, a correct assessment made. Taxpayers should be particularly careful to lodge an objection to an incorrect assessment before the date specified on the notice. Failure to do this renders the taxpayer liable to the amount of tax assessed, as the Commissioner has the power to refuse to reconsider any assessment unless objection is made at the proper time.

The exemptions allowable from the assessable income in the ordinary assessment are as follows :—

(i.) Ordinary exemption of £300, which is allowed where the assessable income is £600 and under. Where the assessable income exceeds £600 the exemption, diminishes • by £x for each £x of the excess over £600. So that on assessable incomes of £900 and over no exemption under this heading is allowed. (2.) Life insurance : This exemption is limited to £50, and must be on the taxpayer’s own life. Insurance premiums paid on children’s lives are not allowable.

(3.) Superannuation-fund payments, limited to £100. (4.) Exemption for children : £25 is allowed for each child under the age of sixteen on 31st March in the year for which the return of income is made, and is all irrespective of the amount of income derived. (5.) An exemption of 5 per cent, on the unimproved value of all land owned by the taxpayer and used in the-production of his assessable income.

The exemptions allowable in the ordinary assessment are not allowable in the war-tax assessment. The law provides that the excess of the assessable income over £300 shall be chargeable with tax in that assessment.

The rate of income-tax chargeable in both ordinary and war-tax assessments is 6d. in the £1 on taxable amounts of £400 and under. On amounts in excess of £400 the rate increases by for each £1 of the taxable amount in excess of £400. The maximum rate is 3s. in the £1, which is reached on a taxable amount of £6,400. To the tax calculated in the war-tax assessment at the rate chargeable is added a super tax of 50 per cent. The maximum rate of income-tax is therefore 7s. 6d. in the £1 (3s. in ordinary assessment plus 4s. 6d. in the £1 in war-tax assessment).

lhe rates of taxation given are those chargeable in assessments made on income derived during the year ended 31st March, 1918, and on land owned at that date. The rates chargeable in assessment to be made for the current year will not be known until this year's Taxing Act is passed in Parliament.

In the case of partnerships a joint return should be made showing the net income derived and the shares of the partners therein. Individual returns need not be made by the partners unless they derive income in addition to that derived from the partnership.

SPECIMEN RETURN FOR DAIRY-FARMERS

With the foregoing preliminary remarks I propose to take a case representative of one branch of farming and illustrate how the incometax form required should be filled in, as follows : — John Robinson, of Levin, is a dairy-farmer and owns 100 acres of freehold land the capital value of which is £6,ooo, made up of unimproved £4,000, and improvements £2,000. These figures are assumed to be according to the county valuation roll. On the farm there is a mortgage of £3,000 at 5| per cent, interest.

The value of meat and other produce consumed for private and domestic purposes during the year was £50.

These details are now entered on the tax-return form as shown in the accompanying facsimile.

It is presumed that Robinson took advantage of the provisions in the Act and secured the Commissioner’s consent to his closing his books on 30th June, on the grounds that the latter- was a more convenient date for his farming operations. It should be understood that in the deductible expenses for labour may be included.wages paid by the farmer to members of his own family, except, of course, his wife. Such payments, . however, require to be ‘supported by documentary evidence if asked for by the Tax Department. ■ ' In connection with the claim for depreciation of premises it may be explained that “ written off ” means actually written off in pursuance of a proper system of accounting. In the case of a dwelling depreciation is allowed on one-third of the cost, the other two-thirds being regarded as used for private purposes. The taxpayer should for his own information keep a copy of the return he submits to the Commissioner of Taxes, in order that he may be able to check the assessment of tax when made. From the return it will be seen that John Robinson’s net assessable income is £600, and his assessment under present rates is arrived at as follows :—

Ordinary Tax. . £ s. d. Assessable income . . . . . . 600 o o Less ordinary exemption . . . . . . 300 o o £3OO o o Less children’s allowance .. .. . . 75 o 0 £225 00. Less life-insurance premiums .. . . . 30 0 o ' £i9s o 0 Less 5 per cent, on unimproved value of land 4£4>000) . . .. .. .. £2OO o o There is thus no balance available for the ordinary tax. War-tax and Super Tax. £ s d Assessable income .. . .. .. 600 o o - Less exemption .. .. . . .. 300 o o £3OO 0 o ' War-tax at 6d. in £1 . . .. . . 7 10 0 Super tax (50 per cent.) . . .. . . 315 o £n 5 o .

The total income-tax payable is therefore £11 5s.

Note.—The writer’s acknowledgments are due to Mr. W. M. Singleton, Assistant Director of the Dairy .Division, for his assistance in assuming figures as to dairying operations on as near a practical basis as possible. Other branches of farming may be dealt with later.

Dairy-produce for £ .. .962 s. 0 d. 0 40 cattle for .. ' ’.. .. 140 IO 0 Horse for .. • .. IO 0 0 Pigs for .. .. .. 60 0 0 Hides and skins for 5 0 0 Roots for .. .. 20 0 0

During the year ended 30th June, 1918, he has sold —

74 cattle at £8 ■ • 592 0 ■ 0 5 horses at £15 .. .. ■ 75 0 0 Pigs .. 20 0 0 Chaff . . 60 0 0

Live-stock and produce on hand at the end of the year (30th Tune, 1918) was— Z s. d

75 cattle at £8 600 0 0 5 horses at £15 75 0 0 Pigs 20 0 0 Chaff .. 42 0 0 Purchases of live-stock for the year were — Cattle, 1 at 40 0 0 Horse, 1 at .. .. .. .. 30 0 0 Boar, 1 at 5 0 0 Other expenses during the year were — Local rates 60 0 0 Insurance IO 0 0 Interest on mortgage 165 0 0 Seeds bought .. .. ' IO 0 0 Foodstuffs bought for stock 15 0 0 Wages paid for labour 150 0 0 Rations bought for employees 50 0 0 Repairs and maintenance, and depreciation on buildings .. . . . . 65 0 0 Freight and cartage 5 0 0 Manures, sacks, cases, &c. . . . . 37 0 0 Chaff-cutting 5 0 0 Petty expenses . . ... IO IO 0

Live-stock and produce on hand at the beginning of the year (1st July, 1917) was— £ s d. -

Part D. INCOME DERIVED IN RESPECT OF FARMING, PASTORAL, MARKET-GARDENING, AND KINDRED PURSUITS During the Year ended , 1918. (Note.—This may be taken for TWELVE .MONTHS ending iodatex>f stocktaking or mastering nearest to 81st March.) Sales of live-stock during.the year for cash and on credit.— y sheep, sold for '. ...cattle, sold for V /...horses, sold for Ocher live-stock (..... ) sold for 3/0 /o ' (Specify.) Sales of produce during the year for cash and on credit: Dairy-produce Grain ... ... . ... ... Other produce ( P.7P3 7 ) (Specify.) Rent received for any part of farm let for grazing, cultivation, or other purpose Amount received for hire of live-stock or implements Estimated value of meat and other produce of the farm used for private and domestic purposes Value of live-stock and produce given in exchange for goods, provisions, &c. Live-stock on hand and not sold at end of year (31st March, 1918, or other stocktaking date as shown above); — p©r Head. sheep, valued valued valued Other live-stock ( ,....), valued at « ), valued at Z&2 3'0 /o ...W±. /e z<z Other live-stock .... j sold for bo (bpvcnyj Sales of produce during the year for cash and on credit: Dairv-oroduce S - - ..Wb.17. — — Grain ... Other produce (. j - (Specify.) Rent received for any part of farm let for grazing, cultivation, or other purpose Amount received for hire of live-stock or implements Estimated value of meat and other produce of the farm used for private and domestic purposes Value of live-stock and produce given in exchange for goods, provisions, &c. Live-stock on hand and not sold at end of year (31st March, 1918, or other stocktaking date aS shown above) t Per Head. sheep, valued at.../Q..~,. cattle, valued at.*£.J»\. horses, valued at.JTl.ZZj . So - — - zS. — - — — Other live-stock None.—Adopt a standard valu and adhere to that value p Produce on hand at e or other stocktaking ,....), valued at valued at &.Q.. — — < (SpeXiy.) per head for each.class of live-stock ar head in subsequent returns. nd of year (31st March, 1918, ate as shown above): — 1 wool (estimated value) .4.Q.. /o 2.<2.. ...... -... Ml So - 7-S. Z.Q.. 737 7 Non- Adopt a standard value per head for each, class of live-stock and adhere to that value per head In subsequent returns. Produce on hand at end of year (31st March, 1918, or other stocktaking date as shown above): — . 1 : wool (estimated value) eatmate d value) Other produce (. .L*w4Hrr7.) (estimated value) (Specify.) Less: Live-stock on hand and not sold at beginning of year (1st April, 1917, or other stocktaking date) : — ' Per Head. sheep, valued ./XL*,., cat tie, valued at<^.«a?.. .<z.. horses. valued at-JL.Za?.. ........7S.. ...... Other live-stock ( 4 ), valued at „ (71<4d.), valued at ........'6'G.. .......4.0... &&.G. 7S "H"; 4$£. £Z.. - - - Z/2 Other live-stock * 1 j ), valued at valued at #.(>.. - - -fS j '(Bonify.) Produce op hand at beginning of year (1st April, 1917, or other stocktaking date): — ' wool (estimated value) (estimated value) Other produce. (.(estimated value) (Bpeorfy.) Purchases (if any) of live-stock during year:— ’ .i.. ....sheep, bought for - —• x... cattle, bought for ' .yZ... horses, bought for Other live-stock (..Z.tfxnjKb...), bought for ...... - • ■ • • ..horses, hono'ht fnr Other live-stock ./.. 2^^?..), bought for - - (Specify.) value of live-stock and produce received in exchange for live-stock and produce •-’« 77Z. Gross Income .... £ //S2 /o - DEDUCTIONS. Rent payable for farm: Rates Insurance... Mortgage intereaV:... DEDUCTIONS. rm: SSZ /o (Give name and address of owner of land.) Rates Insurance... ... ... ... Mortgage in % JO Sood 6(2. ...... /&S "77".. .......... jz .. (/ (Give names and addresses of mortgagees.) «>' ♦Other interest: (Give names and addresses of persons to whom the money is owing.) /o Seed bought (include only for annual crops and renewals of pasture) - - (Give names and addresses of persons to whom the money is owing.) Seed bought (include only for annual crops and renewals of pasture) Feeding-stuff bought for stock (not to include feeding-stuff grown on farm or any produce received in exchange for live-stock, &c.) "Wages paid for labour, &c., oil farm (not to include labour on improvements on /•#. — or any allowance for taxpayer’s own services) Rations bought for employees whose labour is included in foregoing item (not to include produce of farm used for feeding employees) Repairs and maintenance (not to include additions or improvements to) - - - property or plant) e. J Freight and cartage ... ... ... ... ... fl Manure, sacks, twine, cases, wool-packs ... _. . ... Threshing (not to include any item included above in wages) . Petty expenses ... ... ... ... ... ... z t/ . J 3“ - <3-7f /.<?.. ./< Other expenses (to be specified): /o 777. /&O S7>. /.<?.. specified): A copy of the taxpayer’s balance sheet and profit and loss acooant or state- -»t t ment of assets and liabilities at the beginning and end of the year, accompanied -NET INCOME .... £ by a statement of drawings, will be accepted in lieu of the above statement. 7>w - • Not to include interest on capital nor on money borrowed to invest in war loans other than Postoffloe Inscribed Stock. 6 06 - Stock.

Part A. ' CLAIMS FOR SPECIAL EXEMPTIONS. Note. —In the case of partnerships, the particulars in respect ot each partner should bo separately shown. CLAIMS FOR SPECIAL EXEMPTIONS. of partnerships, th particulars in respect of each partner should be separately shown. 1. Amount actually paid by me during the year as life insurance premiums on my own life, for my own benefit or for the benefit of my wife and children ... ... ... ... ... J .................. Note.—This deduction is limited to £50, but in all cases the exact figures should bo stated. 2. Amount claimed in respect of payments to National Provident Fund, Superannuation Fund, or .7)o Insurance Fund of Friendly Society ... ... ... ... ... ... ... £ ZZ ... (Specify name of Fund here)........................................................................ 3. Amount claimed in respect of my own children under the ago of sixteen years dependent r 7X on me, particulars of whom are given hereunder ... ... ... ... ... ... £..Z..'tz he ago of sixteen years dependent .77'.............. (£25 for each child ) .g Name of Child. Place of Birth. Date of Birth. Place of Birth. Date of Birth. . .................................. . . . TFFFc'w. FcT. .. Tfta&l. 1Q/.. .3Mt,,.'7ffaic7.lF.oF.•• ..Titne. /ft).#.. F / 4. Five per cent, on the unimproved value of my interest, ae shown on District Valuation Roll, in the land used in tbe interest at shown on District Valuation Roll, in the land used in the production of the income shown in this return—namely : — return—namely — . No. of Section, Number Unimproved No. on Dictnct, 2° y ' Block. of Value (ss District mZf OU £ n, t Or . Survey District, Purpose for which Months shown on Valuation Town ® 1B ! nct Street, or *-”»• Land used. for District Roll. r •'* c Other Reference to which Valuation District, County, Borough, or Town District No. of Section, Block, Survey District, Area. Purpose for which Number of Months Unimproved Value (as shown on in which Land situated. Locality. Med. Roll). Otbar Reference to' Locality. which Valuation Roll). /<? QjprFjyt. 7/ ".......................... A- *• • £ / 77 \./jGV. 13. .'fatiH..... >/jGO. «• ■ zz ............................ 1 ji zzzzzzzzzzzz zzzzzzzzzzz CLAIM FOR DEPRECIATION OF PREMISES. Amount actually written off the Buildings Account during the year in respect of depreciation of premises used in the production of the income shown in this return, particulars of which are given hereundei >• £>'jLfjf' . M D , Purpose for which Materials of which Number erf Months during Cost of Premtco Where situate. Nature of Premises. r , the above Sfear for which , Nature of Premises. Purpose for which Materials of which Number of Months during the above Year for which Cost of Prernteco used - hull*. the Premises were need. . tome.* Q/.€c7(ff?V...7./.. 13j z&......to. do. Zrt SF). ‘f?.:. .77. <? VnF&y.dbC. . ... (to. ...... /7~o Tbe cost of tho land, on whhfb tho buildings, dto., stand should not bo included. Cbe cost of the Undo whlZh the buildings, Ao., stand should not be included. Part B. Statement of Receipts and Expenditure in respect of Properties let during the Year ended on 31st March, 1919. _ Receipts. £ Expenditure, £ £ Expenditure, £ Rates „ farming property let to Ground rent paid in respect of lease (State names and addresses of tenants.) _ Ground rent paid in respect of lease ... Insurance ... ' ... ... ... JJJApOUJTOO UUHCUUUU Mortgage interest:...... (State names and addresses of mortgagees ) „ other sources ... ... z (State names and addresses of mortgagees.) Other interest:... (State names and addresses of persons to whom money is owing.) zz zz Net income from properties ... ... Total ... .€ | Total ... £ xi os luuuLuu num prupoxiiioa .... £ Total. £