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 ……..