Consumable aids - Thoughts from the Vineyard
What are consumable aids?
In short they are:
- Used in any way, in the manufacture or production of goods and services from which the taxpayer derives gross income.
- Wholly or almost wholly consumed in the production process or become unusable or worthless after being used in the production process.
- Are not component parts of a finished product.
So in a farming sense they are the likes of:
- Fertiliser, lime, urea.
- Hay, silage, baleage.
- Fencing supplies (posts, wire, gates, staples, - stockpiled for later use).
- Dips, drenches, animal health remedies.
- Woolpacks, twine, stencil ink.
- Petrol, diesel, oil.
- … The list is endless.
So why do I mention this?
The IRD are becoming interested in this from an audit perspective - tax payers are potentially not adding back what they should.
The rules allow up to $58,000 of this stuff to be on hand, a deduction taken, without adding it back as closing stock.
If it is more than $58,000 all of that stuff sitting on farm at balance date needs to be added back
- read incomes will increase and more tax to pay.
Let's be careful out there ……..