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Income Tax Act 2007

Timing and quantifying rules - Valuation of livestock - Herd scheme

EC 17: Herd value ratio

You could also call this:

“Calculating the value of farm animals using a specialised ratio”

You can use a herd value ratio to work out the value of certain animals in the herd scheme. If you want to use a herd value ratio for your herd animals, you need to tell the government in the way described in section EC 11. You can also tell them if you’ve recalculated the ratio.

The herd value ratios don’t apply to animals on the Chatham Islands. There’s a special adjustment for Chatham Islands animals in section EC 19.

When you choose a herd value ratio for your animals, it applies in the year you say it does and in later years until:

  • You recalculate the ratio, or
  • You stop using the herd scheme to value those animals, or
  • You haven’t used the herd scheme for those animals for 2 years in a row.

To work out a herd value ratio, you need to ask an expert to assess the value of an average animal in each group of your animals. This value is set on the 30th of April closest to when the national average market values are set.

The herd value ratio is calculated using a special formula and then rounded to the nearest of these numbers: 0.9, 1.0, 1.1, 1.2, 1.3.

The formula adds up the average value times the number of animals for each group, then divides that by the sum of the herd value times the number of animals for each group.

In this formula:

  • ‘Average value’ is the value of an average animal in a group.
  • ‘Number’ is how many animals of that type you have at the end of the year, including ones not in the herd scheme, but not including very expensive animals.
  • ‘Herd value’ is the herd value for that group of animals.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514381.

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EC 16: Valuation under herd scheme, or

“How to value herd livestock at the start and end of the income year”

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EC 18: Inaccurate herd value ratio, or

“Incorrect livestock valuation can lead to tax reassessment”

Part E Timing and quantifying rules
Valuation of livestock: Herd scheme

EC 17Herd value ratio

  1. A herd value ratio is available for a person to use in determining the value of specified livestock in the herd scheme. A person may adopt a herd value ratio for herd livestock of a particular type by giving notice in the way described in section EC 11. A person may also adopt a recalculated ratio by giving notice in the same way.

  2. Herd value ratios calculated under subsection (5) do not apply to livestock on the Chatham Islands. The Chatham Islands adjustment to the herd value ratio is dealt with in section EC 19.

  3. When a person adopts a herd value ratio for livestock of a particular type, the ratio applies in the income year specified in the notice and in later income years until—

  4. the income year in which it is superseded by a recalculation of the ratio; or
    1. the income year in which the person stops valuing, under an election, livestock of that type under the herd scheme; or
      1. the income year following 2 consecutive income years in which the person has not valued livestock of that type under the herd scheme.

        1. For the purpose of calculating a herd value ratio, a person must obtain from a recognised livestock valuer an assessment of the value of an average animal of that person in each applicable class of livestock. The value is determined as at the 30 April that is closest to the day on which the national average market values are set.

        2. The herd value ratio for livestock of a particular type is calculated by using the formula in subsection (6) and rounding the result of the calculation to the nearest of the following figures: 0.9, 1.0, 1.1, 1.2, 1.3.

        3. The formula is—

          Σ(average value × number) ÷ Σ(herd value × number).

          Where:

          • In the formula,—

          • Σ is the total of the individual calculations for all applicable classes of livestock type valued under the herd scheme:
            1. average value is the average value of an animal in a class as described in subsection (4):
              1. number is the number of all livestock of that class on hand at the end of the income year, including livestock that are not in the herd scheme, but not including high-priced livestock:
                1. herd value is the herd value of livestock for a class.

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