The Emissions Trading Scheme (ETS) has been with us for a number of years now with full obligations arising for forestry from 1 January 2008 and for agriculture, the last sector to join ETS, mandatory reporting commences on 1 January 2012. An important thing to remember with respect to agriculture is that only agricultural processors have an ETS obligation, not the farmers, for example, Fonterra, Ravensdown, PPCS, and Alliance.

Forestry is the key area where a benefit can be obtained from ETS. For forest land to be included in the ETS, it must be at least 1 hectare in size, must be planted in forest species capable of reaching 5 metres or more in height at maturity, and have a canopy cover of at least 30%. The width of the block must be at least 30 metres on average, which by its nature excludes most shelter belts.

1990 is the benchmark year for forestry in the ETS and all owners of pre-1990 forest land are captured by the ETS regardless of whether they register or not. However, registration is required if the land owner wants to receive an allocation of compensatory New Zealand Units (NZUs). Applications for an allocation of NZUs for pre-1990 forest land close on 30 November 2011. There are strict criteria that must be met in completing your application, so we recommend that applications are made well before the deadline.

Land owners who harvest pre-1990 forest land and do not replant that land in forest must pay for carbon emitted from deforestation by the surrender of units. Part of this liability would be met with the NZUs allocated as compensation to pre-1990 forest land owners.

There are some important exemptions. The first is an exemption for deforestation of 2 hectares in a five year period. This is an automatic exemption and no application is required. The second exemption is an exemption for pre-1990 forest land that is less than 50 hectares in size. Applications for this exemption close on 30 September 2011. There are complex criteria that need to be met in relation to that exemption. Again, we recommend making an early application.

In relation to post-1989 forest land, entry into ETS is voluntary and it gives the owner or the lessor or forestry right holder the opportunity to earn carbon credits as the forest grows.

How it affects you

If you are the owner of pre-1990 forest land, there are some important due dates to bear in mind: 30 September 2011 for obtaining the 50 hectare exemption, and 30 November 2011 for applications to receive the compensatory allocation of NZUs. If in doubt, we suggest that you contact your agribusiness advisor.


From 1 April 2011, new GST apportionment rules apply where goods are acquired for the purpose of making taxable and non-taxable supplies.

Under the old rules, if the principal purpose of purchasing the goods or services was for making taxable supplies and a full GST claim was allowed at the time of purchase, GST adjustments were then made in subsequent GST periods to reflect the non-taxable use.

Under the new rules, a taxpayer is required to determine, on acquisition, the portion of the purchase price that relates to the making of taxable supplies. This is the intended taxable use of the asset. In subsequent income years, a taxpayer will be required to compare the actual use of the asset against the intended taxable use of the asset and make adjustments to the amount of GST claimed if there is a difference, subject to certain de minimis exemptions.

Where these rules become particularly complicated is where a person moves an asset from being 100% for non-taxable purposes to being available for taxable purposes, or where a taxpayer has acquired assets prior to becoming GST registered and they intend to bring those assets within their GST activity.

For example, if a motor vehicle is purchased and the initial taxable use is determined to be 70%, the taxpayer must maintain a logbook for the entire life of the asset to determine that taxable use remains within 10% of the initial taxable percentage, or that the mandatory value of any adjustment is less than $1,000. This will lead to additional compliance costs.

A number of exclusions and thresholds apply to determine whether adjustments are required and, if adjustments are required, for how many periods adjustments must be made.

If land and buildings were acquired after 1 April 2011 and were subject to the zero-rating provisions for transactions involving land, an adjustment is required for a deemed GST component to the extent that these land and buildings are applied for non-taxable purposes in the future.

How it affects you

If you are purchasing assets that will not be used 100% for making taxable supplies, your initial GST claim will be limited to the percentage of intended use of the asset for making taxable supplies. In subsequent income years, you will be required to make an adjustment based on a comparison of the actual use against the original intended use should you fall outside the de minimis exemptions.


The deemed rate of return for taxing Foreign Investment Fund interests has been set at 8.52% for the 2010-11 income year.

Employees choosing to cash in up to one week of their annual leave entitlement will be subject to PAYE on the cashed up amount as an extra pay or unexpected bonus. This may give rise to adjustments to an employee’s child support liabilities and working for families tax credit entitlements.


“My Problem lies in reconciling my gross habits with my net income”.

Errol Flynn

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