Changes to Livestock Elections Now Law

Grange Associates Ltd - 18 April 2012 (Updated 25 May 2012)

On 28 March 2012, Finance Minister Bill English and Revenue Minister Peter Dunne jointly announced that elections to use the herd scheme will be irrevocable from 18 August 2011. This cancels farmers' ability to switch schemes for the 2012/13 income year.

The above changes were enacted into law on 24 May 2012, following the Finance Minister's 2012 Budget speech.

Two Methods

There are two ways in which farmers can value livestock for tax purposes (including beef and dairy cattle, sheep, deer, goats and pigs), the Herd Scheme and National Standard Cost (NSC).

Herd Scheme

The Herd Scheme essentially treats livestock as if they are a capital asset.  It uses annual national average market values to adjust the value of opening stock to that of closing stock each year, on tax-free capital account.

National Standard Cost (NSC)

NSC is a more typical trading stock scheme where changes in value from year to year are taxable or deductible.  The main difference from a typical trading stock scheme is that costs for breeding, rearing and growing home-bred livestock are standardised nationally.  Farmers apply NSC rates to all home-bred livestock, while purchased stock is valued at cost price.


Previously, farmers were able to elect to switch between the two valuation methods.  Inland Revenue has deemed that some farmers were making these elections in order to receive tax-free herd scheme gains when livestock values rose and tax deductible write-downs when values decreased, which was not the intention of the two methods. 

The IRD has sought to remedy this by rendering any elections made to exit the herd scheme since 18 August 2011 invalid.  Further, any farms currently under the herd scheme regime can now only revoke their elections under very limited circumstances, such as when a farmer sells his farm in full to his or her children or grandchildren.

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All information is correct at the date of article publication. Please note we provide the information as a service only. Accordingly, the contents are not intended as a substitute for specific professional advice and should not be relied upon for that purpose.   

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