Skip to main content
Inland Revenue

Tax Policy

Cessation of farming - general rule

(Clause 30)

Summary of proposed amendments

Section EC 20 of the Income Tax Act 2007 will be amended to provide that when a farmer completely sells their specified livestock before 1 November of a year and ceases deriving income from the disposal of specified livestock, they do not complete the herd scheme adjustment to opening livestock for that year. This date is about half-way between the annual mid-May announcements of the herd values, and so provides a more reasonable basis of valuation of opening herd scheme livestock in the year of the sale.

Currently, this section is optional so long as the farmer qualifies, which provides farmers with a tax opportunity. By making it compulsory, appropriate certainty is provided to both farmers and to the Government.

An exception is noted in section EC 1B where the disposal is to an associated person. This is discussed separately below.

Application date

The amendment is effective from 28 March 2012 (in practice, from the 2012–13 income year).