28 October 2022
As a lot of livestock farmers are having their financial accounts and tax returns prepared for the 2022 year, they ought to take note of the significant increase in livestock values.
The Inland Revenue Department (IRD) annually releases the National Average Market Values for livestock. IRD contracts with experienced livestock agents situated throughout the country to gain market values for livestock classes from each region to gain the National Average Market Value at the end of April, which are released at the end of May.
The 2022 report has shown that livestock values have increased across the board, with some breeds of sheep having the most significant increase of up to 20%. Beef and dairy cattle and deer all increased between 9% and 18%.
Sheep have increased in value by between 14% and 20%. The largest increase was for Ram and Wether Hoggets which increased from $119 in 2021 to $143 in 2022. This is a significant increase from the 2020 National Average Market Values when values declined, which had Ram & Wether Hoggets at $105 in 2020, giving them an increase of 36% over the last two years.
Beef Cattle values have increased over all classes by between 9% and 18%. The largest increase was for Rising One Year Heifers which increased from $563 in 2021 to $665 in 2022. This is a significant increase from the 2020 National Average Market Values when values declined, which had Rising One Year Heifers at $526 in 2020, giving them an increase of 27% over the last two years.
Dairy Cattle across all classes have increased in value between 11% and 17%. The largest increase was for Rising Two Year Steers and Bulls which increased from $762 in 2021 to $894 in 2022. Values in 2021 year had declined from 2020 year where there was a spike in values in that year.
Deer values across all classes have increased in value between 9% and 14%. The largest increase was for Rising One Year Stags which increased from $212 in 2021 to $242 in 2022. Values in 2021 had declined from 2019, which was a year that saw an increase in values.
What’s important to note for livestock farmers is that the gains (and decreases) in value for those with livestock in the Herd Scheme will be treated as capital rather than assessable income, as this livestock is deemed to be capital in nature. Assessable income/deductions will only arise where there has been an increase/decrease in the numbers in each class of Herd Scheme livestock.
The decision whether to move surplus stock into the Herd Scheme in the current New Zealand agriculture economy will need to be discussed with your accounting and business advisory partner. There is no right or wrong answer to this question as each farmer’s circumstances are different however, it’s fair to say that moving stock into the Herd Scheme in years of high values may not be the best decision.
Given the ongoing demand for New Zealand meat products offshore and some of the challenges overseas producers are experiencing, it will be interesting to see how strong the values are when the 2023 figures are released
Those looking to exit farming in the shorter term may decide to move some stock into the Herd Scheme as a means of spreading tax obligations over the next few years.
For specific advice around your circumstances get in touch with the agribusiness experts in our Accounting and Business Advisory team.
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