There are three types of Income Equalisation Deposit Schemes. Although your accountant can advise you on which of the three schemes would be of benefit to you and how to utilise them, a basic understanding of the schemes gives you better control over your business decisions.

#1 Ordinary Income Equalisation Deposit Scheme
The most basic and perhaps the most well-known amongst the three schemes is the Ordinary Income Equalisation Deposit Scheme. This scheme allows farmers to even out their income from year to year. In this scheme, deposits are identified as income deductions and when withdrawn or refunded, the money is treated as income.

Who can benefit from this scheme?
Everyone engaged in agricultural, farming, forestry, or fishing business are eligible for this scheme. This includes people involved in:
● Animal husbandry;
● Beekeeping;
● Dairy farming;
● Market gardening;
● Grain and seed growing;
● Poultry-farming;
● Share-milking;
● Vineyards;
● Vegetable growing; and
● Tobacco growing.

Who is NOT eligible for this scheme?
There are a number of businesses not eligible for the Ordinary Income Equalisation Deposit Scheme. This includes people who are engaged in the following activities:
● Leasing or bailing livestock by the bailer;
● Farming services provided to a forester to manage tree stock;
● Hobby farming;
● Dealing in livestock;
● Aerial topdressing; and
● Services provided to persons carrying on a farming or agricultural business such as seed cleaners or agricultural contractors.

Time Frame Rules for the Ordinary Income Equalisation Deposit Scheme
Under this scheme, a deposit is treated as a deduction in the previous year if it occurred within the specified time frame set by the legislation. This means that deposits should be made earlier than six months AFTER the end of the accounting year or a full month after the deadline of the filing of the relevant return of income.
Here are some examples to guide you.

Example Number 1:
June 30, 2015 balance date (with extension of time arrangement to March 31, 2016). The specified time period is the earlier of:
● Six months from balance date - meaning before December 31, 2015; or
● One month after return is due - not later than April 30, 2016.
Note: The specified time period ends on December 31, 2015.

Example Number 2:
June 30, 2015 balance date (without time arrangement extension meaning the filing date is October 7, 2015). The specified time period is the earlier of:
● Six months from balance date - meaning before December 31, 2015; or
● One month after the return is due - meaning no later than November 7, 2015.
Note: The specified period ends on November 7, 2015.

Deposits Made Outside the Specified Time Period
We strongly advise that you observe the proper timing for deposits to the Ordinary Income Equalisation Deposit Scheme. It is possible to make a request to the IRD to accept deposits made outside of this time frame but each case is assessed on its merits so there is no guarantee it will be accepted.
The Commissioner has statutory power to allow a taxpayer to make deposits outside the specified period for an accounting year, as long as they meet the following criteria:
● The deposit is made earlier than one month from the date of filing the return of income for that accounting year; or
● The deposit is made one month from the date that the relevant return of income is due for filing. This includes any time extension of arrangements agreed to by the IRD.
The Commissioner can decide on a case by case basis if deposits may be allowed after the required date for the requested accounting year.
If the deposit for the requested accounting year is not approved by the Commissioner, the deposit will be applied to the accounting year in which the deposit was made. You will also be contacted about this so you will have the choice to let the deposit apply to the applicable accounting year or to refund it.
You should also note that a deduction will be allowed for the accounting year in which you made the deposit. There is room for adjustments, however, there are some rules. These are as follows:
● Limits are imposed to the maximum deposit (generally the gross income for that year);
● Once you’ve made the deposit, it is generally required to stay in the scheme for a minimum of 12 months;
● A refund can be applied six months after the deposit was made if the funds are needed to purchase livestock, to be used for planned maintenance work, required to overcome serious hardship, or any other situation or purpose deemed appropriate by the Commissioner;
● A refund of deposit which was done less than six months prior can also be made if it is absolutely needed to repurchase livestock after an adverse event, if the farmer is experiencing serious hardship, or if the Commissioner deemed it is needed;
● All deposits will be automatically refunded after five years;
● Refunds are also automatic on the event of death, bankruptcy, or retirement of the individual taxpayer (you). There are also specified rules which apply to the income year allocation of deposits in these circumstances;
● Refunds are applied to the accounting year in which the refund was made. This is treated as income and can be deemed as part of the previous year’s gross income if you’ve made the refund application within the specified time period;
● You are entitled to a rebate of the excess in the event that the tax attributable to the refunds is more than your tax savings; and
● The IRD would pay you interest for the deposits at the current rate of 3%. Note that this only applies to deposits which have been in the account for at least 12 months. This interest will be considered as part of your gross income in the accounting year when you refund your deposit.
Are you confused? If so, your accountant will be able to explain the workings of the schemes to you in further detail. Keep in mind that all of these rules are governing principles and are applied on a case by case basis.
All of the information shared here is based on the IR-SPS 05/09 Standard Practice Statement: Income Equalisation Deposits and Refunds. Consult your accountant if you need further guidance on any of the statements above.